TIDMPCIP
RNS Number : 7556K
PCI-PAL PLC
06 September 2021
PCI-PAL PLC
("PCI Pal", the "Company" or the "Group")
Results for the year ended 30 June 2021
Analyst Briefing & Investor Presentation
Substantial increase in revenues and continued strong new
business momentum
PCI-PAL PLC (AIM: PCIP), the global provider of secure payment
solutions, is pleased to announce full year results for the year
ended 30 June 2021 (the "Period").
Financial Highlights
-- Revenue increased by 67% to GBP7.36 million (2020: GBP4.40 million)
-- Gross margin increased to 76% (2020: 69%) reflecting the
continuing transition of our service delivery mix to the higher
margin, cloud based Amazon Web Services ("AWS") platform
-- Significant increase in new sales bookings leading to signed
recurring Annual Contract Value ("ACV") increasing by 19% to
GBP3.11 million (2020: GBP2.62 million)
-- Total contracted recurring ACV ("TACV(1) ") increased 41% to
GBP9.51 million at 30 June 2021 (2020: GBP6.75 million)
-- Deferred income increased 79% to GBP8.09 million (2020: GBP4.53 million)
-- Loss before Tax in line with expectations at GBP4.19 million
(2020: GBP4.35 million) following continued investment in our
growth plans and a GBP0.55 million foreign exchange loss in the
period (2020: Foreign exchange gain of GBP0.02 million)
-- Raised GBP5.18 million net of expenses to fund further
expansion into Canada, Australia and mainland Europe in April 2021
to grow the Group's addressable market by 40%
-- Cash balances at year end of GBP7.52 million (2020: GBP4.30
million) and the Group is debt free having repaid its debt facility
prior to the period end (2020: drawn down debt of GBP1.27
million)
Operating and Other Highlights
-- North American momentum continues to build, with revenue up
279% and new ACV sales up 29%. North America now accounts for 26%
of the Group revenue (2020: 10%)
-- Recurring revenue model proven with record full year on year
revenue growth, recurring revenues now stand at 88% of all revenue
(2020: 84%)
-- Signed 195 new sales contracts in the year (2020: 109)
-- A further 121 new contracts live with our services in the period
-- Time to go live of new contracts signed in the last 18 months
from the date of signature to deployment ("TTGL") was consistent
with the prior year at around 5 months average across all sales
channels
-- 78% of new sales contracts for the Group generated from channel partners (2020: 78%)
-- Formed the PCI Pal Advisory Committee ("PAC") which included
the committee's first member, payments and cyber-security
specialist, Neira Jones.
-- Completed planned hiring of new Chief Technology Officer
("CTO") with cloud and payments technology leader, Mufti Monim,
joining the business in April 2021.
(1) TACV is the total annual recurring revenue of all signed
contracts, whether invoiced and included in deferred revenue or
still to be deployed and/or not yet invoiced
Current Trading
-- Strong start to new financial year with new ACV in line with management expectations.
-- Sales highlights since year end:
o Two sizeable contracts won through resellers in the US:
-- the first providing our Agent Assist services to a well-known
NASDAQ-listed hosting provider covering contact centres in US and
UK;
-- the second through a new reseller, at whom we displaced one
of our main competitors as their PCI solution of choice, to win our
first deal with a major LATAM-focused energy provider leveraging
our services through our recently announced improved product
offering with Genesys.
-- Continuing to build on our government sector strength in the
UK, with a further large council based in Wales.
-- Signed a new reseller partnership with a multi-national
German headquartered technology provider and BPO which has included
the partnership's first new customer.
-- Added two new members to the PCI Pal Advisory Committee, both
US-based, experienced product and engineering executive, Jayesh
Patel who was formerly Chief Product Office at Vonage Inc, and
Emilia D'Anzica, a customer success executive and consultant.
Board Change
-- PCI Pal today announces that after 24 years with PCI Pal and
its former businesses, Geoff Forsyth, Chief Information Security
Officer (CISO) and current executive director, has informed the
Board of his intention to step down from the Board at the Company's
upcoming AGM. He will continue in his role as CISO for the Company,
serving on the Company's management team, as he works towards
retirement which is expected to be in the next 24 months.
Commenting on results and prospects, James Barham, Chief
Executive said:
"We have taken another sizeable step forward in FY21. Our
advanced cloud capabilities have allowed us to continue to grow our
customer reach through our expanding partner eco-system, serving
customers not only in our primary geographic focus areas, but
across the world.
"With our key sales metric of TACV having grown by a further 41%
year-on-year, I have been particularly pleased to see a real
cohesion in the business this year, as despite a near doubling in
new contracts won, we have maintained a strong deployment
performance of customers going live in the year.
"I am delighted by the continued growth being shown by the
business as we deliver against our strategy. We have therefore
continued to make positive, progressive changes internally as we
further refine our operations to best support our pace of growth.
As well as the further geographic expansion planned in FY22, we are
hugely excited by the additional foundational strength we are
putting in place across Customer Success, Engineering, and Product
Management.
"I am looking forward with confidence as we look to deliver
another strong year of performance from the Group in FY22 as we
further cement our relationships with our current and future
partners, and drive customer go-lives of our class-leading cloud
solutions with organisations across the world."
Analyst Briefing: 9.30am on Monday 6 September 2021
An online briefing for Analysts will be hosted by James Barham,
Chief Executive, and William Good, Chief Financial Officer, at
9.30am today, Monday 6 September 2021, to review the results and
prospects. Analysts wishing to attend should contact Walbrook PR on
pcipal@walbrookpr.com or 020 7933 8780.
Investor Presentation: 4.00pm on Wednesday 8 September 2021
The Directors will hold an investor presentation to cover the
results and prospects at 4.00pm (UK time) on Wednesday 8 September
2021.
The presentation will be hosted through the digital platform
Investor Meet Company. Investors can sign up to Investor Meet
Company and add to meet PCI-PAL PLC via the following link
https://www.investormeetcompany.com/pci-pal-plc/register-investor .
For those investors who have already registered and added to meet
the Company, they will automatically be invited.
Questions can be submitted pre-event to pcipal@walbrookpr.com or
in real time during the presentation via the "Ask a Question"
function.
For further information, please contact:
PCI-PAL PLC Via Walbrook PR
James Barham - Chief Executive
Officer
William Good - Chief Financial
Officer
finnCap (Nominated Adviser and
Broker) +44 (0) 20 7220 0500
Marc Milmo/Simon Hicks (Corporate
Finance)
Richard Chambers (Corporate Broking)
Walbrook PR +44 (0) 20 7933 8780
Tom Cooper/Nick Rome/Nicholas Johnson +44 (0) 797 122 1972
pcipal @walbrookpr.com
About PCI Pal:
PCI Pal is a leading provider of Software-as-a-Service ("SaaS")
solutions that empower companies to take payments from their
customers securely, adhere to strict industry governance, and
remove their business from the significant risks posed by
non-compliance and data loss. Our products secure payments and data
in any business communications environment including voice, chat,
social, email, and contact centre. We are integrated to, and resold
by, some of the worlds' leading business communications vendors, as
well as major payment service providers.
The entirety of our product-base is available from our global
cloud platform hosted in Amazon Web Services ("AWS"), with regional
instances across EMEA, North America, and ANZ. PCI Pal products can
be used by any size organisation globally, and we are proud to work
with some of the largest and most respected brands in the
world.
For more information visit www.pcipal.com or follow the team on
Linkedin:
https://www.linkedin.com/company/pci-pal/
This announcement contains inside information for the purposes
of Article 7 of Regulation 596/2014.
CHAIRMAN'S STATEMENT
FOR THE YEARED 30 JUNE 2021
I am very pleased to report on another year of significant
progress for the business. In a year overshadowed by the impacts of
the COVID-19 pandemic, the PCI Pal team has nonetheless forged
ahead to achieve impressive top line growth. As a result, our
leading forward indicator of growth, TACV, grew by 41% to GBP9.5
million in the year and deferred revenue grew 79% to GBP8.1
million, helping to grow our forward recognized revenue visibility.
Recognised revenue also grew strongly by 67% to GBP7.4 million and
gross margins continued to improve to 75%. These financial metrics
are all hallmarks of a strong and growing cloud company and SaaS
business model.
Not only did the Group not need to furlough or layoff any staff
as a result of the COVID-19 pandemic, we continued to hire in order
to support that strong growth. At the same time, the team have
continued to build the Group's infrastructure through investment in
process, systems, and importantly, our incredibly talented people.
We are grateful for the support of our people in these challenging
personal times, as well as other key stakeholders, including our
new and existing shareholders in supporting of the equity funding
in April 2021, and our channel partners with whom we continue to
drive our growth.
People
The COVID-19 pandemic is lasting longer than most of us
expected, but our people have proved to be incredibly resilient and
have adapted well to the new circumstances, and I personally thank
them for that. The Company has put a great deal of effort in to
supporting our people; not just by accommodating work-from-home
requirements and providing collaborative technologies, but by being
understanding, respectful, flexible, and most importantly listening
to people's needs and concerns. From this enhanced culture,
communication and teamwork, new opportunities for individuals and
the business are emerging. We have also taken advantage of the
opportunity to invest in new or deeper skills, most notably in
engineering, customer success, and senior management with the
recruitment of a new CTO to lead our technology and product plans
for the next phase of our strategic growth plan.
Overall, the PCI Pal team has grown from 58 to 71 employees over
the course of the year, and we plan additional expansion in FY22.
As the world tentatively emerges from lockdown and uncertainty is
reduced, the market for talent has become more competitive,
willingness to move jobs has increased, and the supply of technical
Cloud-experienced people has tightened. The Board remains as
committed as ever to supporting our people in terms of professional
development, flexible hybrid work environments and competitive
compensation and benefit packages. I am therefore confident of our
ability to not only retain our people, but also attract new talent
necessary to support our ambitious growth goals.
Board Change
Geoff Forsyth, CISO and current executive director, has notified
the Board of his intention to step down from the Board with effect
from the Company's upcoming AGM. Geoff will continue his important
management role as CISO for the Company, leading our Information
Security and Compliance team, until his intended retirement in the
next two years. Geoff is one of the founders of the PCI Pal
business and has played a critical role in building the security,
technology, and compliance foundations of this fast-growing
business. On behalf of the Board and everyone at PCI Pal, I would
like to thank Geoff for his significant contribution, and we look
forward to his continued valuable input as he works towards
retirement.
Strategic Direction
Several years ago, the Group adopted a disruptive strategy for
our sector of being channel-first and delivering our solutions
exclusively through the Cloud. FY21 again delivered tangible
evidence of the ongoing success of that strategy, and not just in
the achievement of impressive top line growth. The Group continues
to derive most of its growth and new customer acquisitions from its
partner relationships and has expanded its partner ecosystem by
adding world leading organisations. Accelerating rates of Cloud
adoption and digital transformation initiatives at end customers
around the world matches well with our pure Cloud approach, further
differentiating ourselves from our competition in the eyes of
partners, customers, and industry analysts alike. In FY21 the Group
added 195 new customers contracts, almost double the 109 achieved
in the prior year.
Building on this strategic success to date, the Board undertook
a detailed refresh of a five-year strategic plan early in the
current year. The Board concluded that further success was
achievable through, geographic expansion, customer success and
gains in net retention, and the professionalisation of our product
management function to assess opportunities for additional features
and/or products in the arena of secure payment solutions. The Board
is optimistic about what can be achieved in the future.
Fund Raising and Debt Repayment
To support the necessary investment and execution of our
refreshed strategic plan, the Company raised an additional GBP5.18
million (net of expenses) through an equity placing at GBP0.95
pence per share in April 2021. The placing was well received by
existing shareholders and attracted further new institutional
investors both in the UK and North America.
The strong trading and cash flow performance in FY21 enable the
Board to take the economic decision to fully repay in June 2021 its
outstanding debt facility, ahead of schedule. It should also be
noted that the Board chose not to benefit from direct government
support relating to the COVID-19 pandemic in any of the territories
in which it operates.
Full disclosure of the terms of the equity raise, and the early
repayment of debt, has been made in the notes to these accounts and
within the Chief Financial Officer's Review.
Corporate Governance
Last year I outlined several key areas of corporate governance
and related initiatives aimed at setting the Board on a path of
continuous improvement over time. These areas included formal and
structured board effectiveness evaluations, a fresh approach to the
assessment of the Company's risk profile, expansion of the work
undertaken by the board committees', and embarking on a five-year
refresh of our forward strategic plan to take effect from FY21
onwards. This year the Board has continued to seek improvements in
these areas and has taken advantage of remote board meetings to
increase the frequency of board meetings while seeking to reduce
the length of these meetings. This has allowed the Board to address
more matters than in the past, and to improve our ability to
challenge and question the executive management as they continue to
drive the business forward as we deliver against the undoubted
market opportunity, thereby helping our independent judgement. The
new Environmental, Social and Governance ("ESG") report and
commitment to improving our ESG footprint over time is another
example of improvement steps taken this year.
One consequential element of refreshing our five-year strategic
plan is assessing the future governance needs of the Board as the
Company becomes larger, more internationally complex, serving a
broader range of global partners and customers, and building an
even more culturally diverse team of people in different countries.
To that end the Board has actively discussed succession planning of
non-executive directors who will reach term limits in the near term
to ensure that we continue to have the necessary range of
expertise, skills, and diversity on the Board to support the
achievement of the refreshed five-year strategic plan.
Earlier this year we announced the formation of the PCI Pal
Advisory Committee (the "PAC"). The formation of the PAC is
intended to assist the CEO and senior management with expert
outside functional advice most relevant to the execution of its
refreshed strategic plan. It is also intended to enhance the
Board's ability to meet its governance responsibility to manage its
risk profile by having access to expert and more diverse, global
outside viewpoints. I am therefore very pleased that following the
year end, we have expanded the PAC to now include a total of three
members with a range of backgrounds and expertise for business
communications in the Cloud including payments, product management
and customer success. All of which are key areas of our refreshed
strategic plan. The profiles of the PAC members can be found on in
the biography section below, with the two newest members Jay Patel
and Emilia D'Anzica both being US-based.
Environmental, Social and Governance
This year, the Board has produced its first ESG report, which
sets out our commitment to understanding, measuring, and over time
improving our 'ESG footprint'. This report also sets out our
initial assessment of the key ESG metrics which we believe are most
applicable to the Group, as well as our goals for achieving
measurable improvement for each metric over time. Closely linked to
ESG, and to the success of our people and our business, is a
culture that is supportive of promoting diversity and inclusion.
The Company is committed to achieving a balance of diversity across
its teams, for example in gender and ethnicity, and is putting in
place several initiatives to better understand its data related to
these aspects of our team make-up. This data will in turn allow us
to better refine our processes to ensure that we are working
towards a working environment that promotes diversity and
inclusion. The Board is fully committed to supporting management to
be successful in these goals and has itself made early progress in
this area through the membership of the newly formed Advisory
Committee. The Board fully intends to continue this progress as we
plan for the succession of retiring directors in the future.
Although PCI Pal is a small software company relative to the
grand scale of global challenges around corporations and ESG, the
Board nonetheless takes its ESG responsibilities seriously and has
begun its own journey of self-directed improvement. The ESG report
can be found as part of our governance reporting below.
Changes in Auditors
During the year, the Audit Committee took the decision to rotate
its external auditors from Grant Thornton who had served as the
Company's auditors for many years. This governance best practice
step led to the appointment of BDO who has now completed their
first year's audit of the Group.
Stakeholder Communications
As a board, continuous improvement in shareholder communications
remains a constant objective. With the equity placings over recent
years, the mix of our shareholders has shifted to a greater
proportion of institutional investors. Nonetheless we remain
focused on clear communications to all investors, both retail and
institutional. This year the CEO and CFO have provided further
depth in key metric disclosures and have hosted several video
briefings using the Investor Meet Company portal, which provides
retail shareholders, as well as analysts, the opportunity to listen
to, and question, the CEO and CFO. As Chairman, I am available as a
direct line of communication to all shareholders in case other
questions arise that need to be answered independently, as well as
offering meetings with institutional shareholders around the time
of the AGM. Also, in recognition of the Company's wider
communication responsibility to all stakeholders, this year the
Company has expanded its media plan of publishing articles and
content on social media and through the Company website to help
provide a deeper understanding of the Group's products and
markets.
Finally, I am pleased to note that for the first time, the Board
has provided disclosures under S.172 of the Companies Act 2006.
These disclosures are intended to explain how the Directors
undertake to promote the success of the Company for the benefit of
all its stakeholders as a whole.
Looking Forward
PCI Pal is well placed to benefit from the continuing trends of
Cloud adoption, digital transformation in the business
communications space, and the evolution of payment technology and
social purchasing preferences. These trends have only accelerated
since the onset of the pandemic and are creating a net positive
environment for our business model of providing pure Cloud
services. Our successes in FY21 have further strengthened our
confidence in our business model and the timing of our additional
investments to expand more internationally through our global
partner channels.
I look forward to sharing further progress reports and news
during the coming financial year, as we continue our strategic
growth journey.
Simon Wilson
Non-Executive Chairman
CHIEF EXECUTIVE'S STATEMENT
FOR THE YEARED 30 JUNE 2021
Introduction
PCI Pal has had an excellent year, proving both the strength of
our market opportunity, as well as the robustness of our product
strategy and SaaS business model in the face of the COVID-19
pandemic. I am particularly pleased with the continued revenue
growth momentum since the half year, ending the period ahead of
market expectations with revenue increased a substantial 67% year
on year to GBP7.4 million (2020: GBP4.4 million).
At PCI Pal, our vision is to be 'the preferred solution provider
that organisations turn to globally for achieving payment security
and PCI compliance in customer engagement environments'. To meet
this vision we set ourselves three key strategic pillars for
growth; firstly, to be the leader for true cloud solutions in our
space; for these solutions to be available to customers globally;
and to leverage a sales model that by majority sells through
channel partners. This strategy has driven a significant increase
in customer adoption of our products, with customer numbers
substantially increased year on year. Subsequently, this continued
momentum is further driving sustained strong revenue growth in line
with our plans.
As a result of our successful execution against sales plans, we
have increased our key growth metric and indicator of future
revenues of TACV by 41% year on year to GBP9.5 million (2020:
GBP6.7 million). It is the sustained accumulation of this metric
that is driving our continued revenue growth.
Behind this strong growth in momentum in TACV, is the annual
value of contracts signed which increased 19% year on year. It is
particularly pleasing to see the progress of our volume-based sales
strategy working which minimises the risk of significant customer
concentration. As a result, we achieved a substantial uplift in the
quantity of new customer contracts signed in the year which
increased 79% to 195 (2020: 109).
Delivering our growth strategy
The increase in new customer contracts won is further evidence
of the opportunity with the small to mid-size volume end of the
contact centre market globally, where the vast majority of contact
centres are 250 agent seats or less. In the US alone there are
37,000 contact centres with between 10 and 250 agent seats,
representing 94% of all contact centres. Our strategy to be able to
serve the breadth of this market both in size and geography has
enabled us to continue to grow new business sales even in a year
when many businesses were re-prioritising their own internal
projects to defend against the impacts of the pandemic.
As well as the higher quantities of small to mid-size contact
centres, we have continued the trend set in the prior year of
winning business with enterprise-size organisations. Highlights
include a competitive contract win with a well-known global
sports-fashion retailer headquartered in North America, a service
that is now live across more than 1,500 agents; a FTSE-listed
Pan-European UK airline, and a Fortune 500 supply chain management
firm. These enterprise wins continue to be the result of both our
channel partner strategy as well as our direct account-based
marketing efforts driving enterprise lead generation.
It is testament to the strength of the core markets across which
we operate, namely the business communications space, payments
market, and cybersecurity industries, that demand continues to
increase for our cloud-based secure payment services. This is
particularly true considering the increased numbers of homeworkers
and the sustained requirement for flexible working, as companies
look to leverage cloud services to provide their teams with secure
solutions that allow them to continue their business operations no
matter where they are working. Additionally, as the communications
mix continues to grow through increasing touch-points with digital
customer engagement, our solutions not only secure, but act as an
enabler in our partner's omni-channel customer experience
environments.
Equity placing
Having made significant progress in refreshing the Group's
five-year strategic plan through the first three quarters of the
financial year, the business took the decision to undertake an
equity placing in April 2021, raising gross proceeds of GBP5.5
million (GBP5.18 million net of expenses) to allow it to invest in
further expansion into the new global territories of Canada,
Australia, and mainland Europe. These are some of the largest
contact centre markets in the world and will grow PCI Pal's
addressable market by over 40% as we begin to expand our proactive
sales and marketing efforts into these regions. To succeed in these
new regions we will be looking to hire talented people and to work
with our existing, and growing, network of global partners, many of
whom already have operations in these territories.
The majority of the execution of those plans commence in FY22,
but naturally we have not wasted any time in maintaining the pace
as we roll out these calculated but ambitious next steps as we head
into the new financial year.
PCI Pal Advisory Committee ("PAC")
Having established the Company's Advisory Committee in September
2020, we set out our plans to leverage the collective professional
and industry experience of advisors whom we intended to add to the
committee over the coming years. During the year we were very
pleased to welcome the highly experienced payments expert Neira
Jones to the PAC. As anticipated, the PAC has been an excellent
resource for myself and the Board as we undertook a refresh of the
Company's five year strategic plan during the year.
Since the year end, we have added two further members to the
PAC, Jay Patel and Emilia D'Anzica, covering key strategic areas
for the business including product development and management of
global cloud voice and digital environments, and customer success
to minimise churn and drive upsell over the long term as we
continue to scale this business. The PAC will continue to add value
as we build on our rolling strategic plan and product vision in the
years to come.
COVID-19
As previously reported, PCI Pal was well positioned to deal with
the implications of the onset of the COVID-19 pandemic. Supporting
our view that the contact centre market was likely to grow, Contact
Babel has confirmed in its recent market reporting that both the US
and UK contact centre markets have expanded by 2% and 4%
respectively across 2020, the largest single increase in both
regions for more than five years.
Our early investment in cloud technology has been a key
component of our capability to deal with the operational changes
that occurred during the pandemic. Today, as the market settles we
are now at the forefront of flexible cloud solutions for secure
working for contact centre workers. Homeworking, and the knock-on
challenges posed to businesses who have employees working remotely,
is something that all businesses are incorporating into their
business communications requirements. PCI Pal is working closely
with our partners to ensure our payment products are closely
aligned with their solution offerings so, as the digital shift
gathers even more pace, we are at the forefront of this
opportunity.
Finally, the Group is currently undertaking a 'Return to Work'
assessment for its employees in the UK and US head offices. We are
continuing to monitor the situation and anticipate having more
clarity on our plans by the end of H1 FY2022, depending on local
government guidance. We have remained in contact with our people
either through company-wide surveys or through 1:1 manager
engagement. As such we have begun to plan for what the Return to
Work may look like for PCI Pal but believe it sensible to let the
current situation stabilise further before making a final decision.
Before the pandemic more than 60% of the Group's employees were
already home-based and so PCI Pal has faced little disruption with
all team members moving to working from home.
Our People
Focus on people is a critical aspect to PCI Pal's business
strategy. We have maintained a corporate objective throughout the
last two years to create a culture that people want to be part of.
I have been with the PCI Pal business from day one, and I am
extremely proud to see the business evolve and grow from the small
team that started it, to the 71 employees that we had at the year
end, with more expected to join over the coming year as we continue
to execute against our plans, and achieve our vision.
Our people are the backbone of the business and to see them
achieve their own goals, working together whilst also 'Enjoying the
Journey', which is one of our key values, gives me real confidence
for the future of this growing business. Many businesses have been
hindered operationally by the recent COVID-19 pandemic, but our
team was able to take it all in their stride and we were brought
closer together and more cohesive as a result.
Strategy and Market
PCI Pal's mission is 'to provide organisations globally with
secure cloud payment and data protection solutions for any business
communications environment including voice (phone), chat, social,
and email, all of which are commonly incorporated into the contact
centre customer engagement mix'.
PCI Pal's vision is to be 'the preferred solutions provider that
organisations turn to globally for securing payments across all
business communications through easy to integrate and simple to
deploy cloud technology'.
Our addressable market is any size organisation taking payments
within business communications environments, anywhere in the world.
We work with our partners and customers to allow them to secure
payments whilst adhering to strict information security rules
around credit and debit card data, namely PCI Compliance. In
particular our solutions are utilised within call or contact centre
environments.
PCI Pal has customers across the globe today as a result of our
cloud capabilities. We have had a particular focus on the UK market
where the business was established, and the US where we launched in
2018. Following our most recent fund raise in April 2021, we are
now planning to start to proactively expand the business into three
new core territories; Canada, Australia, and mainland Europe. These
three new territories represent some of the largest contact centre
markets in the world and as such we expect that over time this will
grow our addressable market by at least 40% as we begin to execute
on those plans.
With more than 75% of our new business generated from channel
partners, and with many of our partners being large,
globally-dispersed organisations themselves, we are well-positioned
to leverage these routes to market to support our further global
expansion. We will continue to strategically target new partners,
both those with a global footprint as well as regional sector
specialists.
Our addressable market is underpinned and strengthened by two
major global industry dynamics occurring today; the increase in
regulation and governance surrounding data security worldwide; and
secondly, the transition in the communications market of services
served from on-premise equipment moving to services delivered from
the cloud. With the combination of these dynamics, PCI Pal is
acting as an enabler for both security but also the payment itself,
seamlessly integrated into our customer's customer engagement
tools. Additionally, as the first in our space to bring a
true-cloud offering to market, and the only global player with a
sole focus on cloud, PCI Pal is in a strong position to capitalise
on the digital transformation occurring across the business
communications, security, and payments markets.
Further to this, contact centres are the modern day shop-front
of many organisations, and customers today expect not only an
exceptional customer experience but also to feel secure at the same
time, especially when sharing their most sensitive personal data,
such as payment data. PCI Pal solutions solve both the security and
compliance challenge for any business taking payments from these
customers, and we do it to benefit the wider customer experience,
working seamlessly with organisations' omni-channel customer
engagement tools.
By using PCI Pal services, companies not only secure the most
sensitive of customer data, payment data, but they do so in such a
way that will allow them to comply with the ever-changing
information security and data governance standards related to how
they handle this data. Additionally, by using PCI Pal services,
customers will make significant progress towards broader regional
data protection regulation such as GDPR in the European Union and
the California Consumer Privacy Act in the US.
Contact centre markets in both the UK and US represent between
2-3% of the working populations of those countries, and the trends
are similar in the new territories we are expanding into in FY22.
Our ability to serve any size contact centre is essential when
considering the make-up of this large employment pool across our
market. In the US alone 94% of all contact centres (37,000 contact
centres) have between 10 and 250 agent seats, employing 2.04
million agents which makes up more than 55% of the entire employed
agent population in the country.
It is therefore a key differentiator for us to be able to serve
organisations across our entire market. Our customers range from
small contact centres up to the very largest with more than 5,000
agent seats, but by far the majority are in the small to mid-size
with our average annual contract values of between GBP15,000 and
GBP20,000. This more numerous end of the market is a substantial
risk reducer for churn in the business, given our revenues are
spread across a higher number of customers. We also target the less
numerous, larger enterprise-size businesses and contact centres
(defined as being contracts with an annually recognised revenue
value for the Group in excess of GBP100,000 p.a.) which currently
represent 43% of our revenues. As there are relatively far fewer of
these larger contracts, the enterprise deals are less predictable
and more challenging to forecast.
PCI Pal Cloud
Having launched our cloud environment in October 2017, and
having defined a key strategic objective to be the leader in
cloud-based secure payments services in our market globally, we
have gathered significant technical momentum. Our platform
continues to evolve as the most mature in the space with the
majority of competitive solutions available still leveraging
on-premise customer hardware or privately hosted hybrid-cloud
environments.
We have focused much of our earlier stage product development
efforts on our capability to integrate cloud-to-cloud with major
technology vendors with whom we partner. These include some of the
best-known names in both the business communications and payments
space including Genesys, Worldpay, Vonage, 8x8, and Talkdesk.
Furthermore, we have pioneered the availability of viable secure
payment cloud solutions for some of the largest contact centres in
our target markets, supporting more and more enterprise business
moving to the Cloud, providing our services to enterprise-level
customers with contact centres exceeding 5,000 agents.
Amazon Web Services is our chosen provider of virtualised cloud
services where we host our platform today. Validating our
technology strategy, AWS is the most commonly used cloud hosting
provider across all our partners and is consistently growing in
utilisation by organisations around the world undertaking digital
transformation to the Cloud. Additionally, utilising AWS has
enabled us to produce highly flexible services and integration
methods which allows us to be agnostic to the communications
environment to which we are integrating.
Our true-cloud approach allows us to deliver services across the
globe whilst maintaining data sovereignty and regional handling of
payment traffic as we are able to leverage the data regions we have
created within the AWS global hosting environment. This is both of
appeal to smaller local customers who need their data to be handled
in the territory within which they trade; but equally to larger
multi-national organisations whose businesses may be geographically
dispersed with complex data governance requirements. Our customers
can therefore use a single PCI Pal service, but choose to handle
their customers' data locally wherever that customer is utilising
the service.
PCI Pal's cloud platform has been developed from the outset
using cloud native technologies, and today our platform continues
to evolve. We leverage both a micro release strategy enabling us to
be more nimble with development cycles and DevSecOps, automatically
baking-in security which reinforces our ability to develop secure
software at speed. This strategy, along with our agile product
development teams, ensures we continue at pace to test and learn
for new products and features. Our investment in our cloud platform
places us in a position of strength from which we can forge ahead
as we invest further in new product and features to further
capitalise on the breadth of the market opportunity globally.
Product Update
Our core products today cover the entire spectrum of business
communications; Agent Assist, our live agent secure payment tool;
IVR, our fully automated service for auto-attendant environments
where no agent is involved; and Digital, our offering to facilitate
businesses to handle secure payments through any number of digital
channels such as chat, social, SMS, email and more.
In the year we launched our speech recognition offering for both
our Agent Assist and IVR services. This offering is most popular
where a customer may have difficulty entering their card details
using their telephone keypad, so instead can speak them. We have
successfully sold our new speech service in the year, with a number
of customers now live using these services.
Since taking over as CEO in late 2018, I have driven further
investment into our engineering resources and worked towards
implementing product management functions within the business.
Afterall, it is the relevance of our products to our partners and
customers that is a critical component of our ability to retain and
grow our business. FY21 was always planned to be a year of further
positive development for PCI Pal from an engineering and product
standpoint.
I was pleased to announce our new CTO's arrival to the business
after an extensive search where we sought to find the right mix of
cloud, payments, and communications experience. Mufti Monim is a
high energy technology and product leader with extensive experience
across the cloud payment space, as well as having experience
working in the mobile communications industry. His previous roles
include CTO at Deko, a leading, high-growth, retail finance cloud
technology provider, and Head of Technology for financial and
online at Lebara, the well-known, multi-national telecommunications
and international money transfer business.
With the new CTO's input and experience, alongside that of our
existing management team, plus the advice and experience we are
gathering from our advisory committee, we are well placed to
further evolve our product offerings over the coming years.
Following the equity fund raise in April 2021, we will continue to
accelerate our investment in product development and product
management, and I look forward to updating investors throughout the
year on that progress.
North America
Having completed our third full financial year in the US since
launch in 2018, we have seen sales and revenue momentum continue to
build as well as further success in securing new partnerships with
additional US-headquartered global businesses.
Our sales progress is particularly evident in the increased
quantities of customer contracts that we have signed as a result of
our success in the last two years of acquiring and on-boarding new
partners, as well as our direct marketing efforts. In the year, we
increased the number of customer contracts won by 68% to 62
contracts (2020: 37), with 76% of these coming from channel
partners. These new contracts allowed us to increase our key growth
metric of TACV by 66% year on year to GBP2.76 million (2020:
GBP1.66 million), an good indicator of future revenues.
Contributing to the TACV uplift we completed the year with
GBP1.34 million of new ACV contract value, an increase of 26% on
the prior year's achievement which included the Company's second
largest contract in history. Excluding this one-off deal in FY20,
the average ACV contract values are GBP21,500 in FY21 against
GBP17,400 in FY20, which illustrates the significant increase in
underlying velocity and quantity of deals that the US business has
produced.
Further to this increase in volume sales, we have continued to
be successful in signing additional enterprise-size businesses,
including several Fortune 500 companies, and one of the best known
sports fashion retailers in North America.
As a result of growing sales success since our launch in the US,
revenues for the region are now beginning to build to more notable
levels, increasing to GBP1.8 million (2020: GBP0.5m). Our US-based
deployment team have been very successful in the year. We finished
the year with GBP2.06 million of live annual ACV contracts from
North America (2020: GBP0.59 million). The highlight deployment was
one of the region's largest deals which went live across more than
1,500 agents in less than 2 months from date of signing.
We have continued to expand our channel partner eco-system in
the region in line with our plans, this has also included notable
extensions to existing relationships with major players in both the
CCaaS and Business Process Outsourcer ("BPO") sectors respectively.
In Q4 we announced the expansion of our existing relationship with
Genesys, one of the largest technology suppliers to the contact
centre market worldwide. PCI Pal products are now available
natively within Genesys Cloud products as a premium partner on the
Genesys AppFoundry globally. Adding to our growing strength in the
BPO sector, we expanded one of our existing regional channel
relationships with one of the market leaders to a global
arrangement, which during the year resulted in a number of new
contracts across both the US and Europe. Further to that, we signed
another major BPO with global operations as a channel partner
during the period, signing our first US deal with that partner in
H2.
The US sales effort with new partners continues to benefit the
business Group-wide, with many of our global partners having
headquarters in the US, but with global operations spread across
our key markets. We have seen a direct corelation between our
partner activities in the US through to increased sales pipeline in
other regions. PCI Pal remains tactical in how we both seek out new
partners, and how we then enable the full potential of those
relationships over time. This is only possible through the quality
of the people we have brought into this business, particularly
across sales and marketing, and the increasing data analytics
capabilities of our sales and delivery efforts that allow us to
better understand how best to invest time and effort.
In the final month of the financial year we hired a new sales
leader who will be running our US sales team, reporting to our
US-based group Chief Revenue Officer. This was a newly created role
to add a layer of regional sales management focus and to free up
our CRO as we begin to expand into new territories. The US is our
most important market and we will continue to invest into the
country to maintain our strong growth.
EMEA
The EMEA business had an excellent year and, as the more mature
region in the Group, saw another year of substantial revenue growth
with a year-on-year increase of 41% to GBP5.5 million (2020: GBP3.9
million). This growth continues to be driven by the accelerated
sales bookings from the back end of the prior year and across FY21,
as customers signed reach 'go-live', and we begin to release
revenue in line with our revenue recognition policies.
Revenues in EMEA are generated both from services on our first
generation, privately-hosted platform and, since 2018, from our
margin-rich, true-cloud AWS environment. We ceased selling new
services on the first-generation platform in 2018 and have an
active transition programme to move customers from this platform
over to our AWS platform over the next 18 months to allow us to
de-commission that environment.
EMEA new sales momentum in the year has been strong throughout
with our key future indicator of revenue, TACV, increasing 34% to
GBP6.7 million (2020: GBP5.0 million). Illustrating the strength of
our channel strategy, we sold a further 126 customer contracts in
the year, a 64% increase on the prior year, with 79% coming from
channel partners. The ACV value of these contracts increased 12%
year on year to GBP1.7 million against a relatively strong prior
year comparator (2020: GBP1.5 million).
Our partners continue to perform well for us in the region. Many
of the top performing resellers are US-headquartered multi-national
organisations with whom the EMEA team are benefitting from our
North American partner relationship expansion work. Additionally,
we have long standing partnerships with key regional players such
as Civica and Capita, for whom we are the solution of choice for
their payments businesses.
Sales highlights in the year include a contract, which is now
live, with one of the best-known pan-European airlines in the UK, a
FTSE100 energy provider, and more than 25 further contracts with
government agencies, the majority of which are local authorities
across the UK. Already working with two of the largest central
government agencies across more than 7,000 agent seats, during the
year we increase our total of UK government customers to over 60,
further strengthening our position in this important and stable
sector.
The EMEA business has to date been primarily focused on the UK
market. However, we have also successfully sold and deployed
solutions across other countries in Europe. As a result of our fund
raise in April 2021 we are beginning to execute on our plans to
establish a formal footprint in mainland Europe and aim to make our
first dedicated European hires later in the financial year to June
2022. We see an extensive opportunity for the business in mainland
Europe which, similar to North America, is a relatively untapped
market.
Channel Partners
Our channel sales model has been one of our three pillars of
strategic focus since we set out the current plan over four years
ago. Our partners include some of the best-known names in the
high-growth business communications markets (CCaaS and UCaaS) such
as Genesys, 8x8, Talkdesk, and Vonage; as well as partners from a
variety of markets including payment service providers, BPOs, and
systems integrators. In the year, 78% of all new contracts were
generated from partners (2020: 78%), which contributed 72% in ACV
value for the year (2020: 42%).
We categorise our partners into four different groups:
-- Integrated Partners - Such as CCaaS, UCaaS or carrier
partners with tight telephony, and sometimes desktop, integrations.
Repeatable integrations facilitate shorter customer implementation
times.
-- Solution Providers - Typically Value-Added Resellers ("VARs")
and Systems Integrators of the major traditional telephony
platforms such as Genesys, Cisco, and Avaya. Solution Providers
also includes Payment Service Providers such as Worldpay B2B,
Capita Pay 360, and Civica. We also include our BPO partners in
this category of partners.
-- Referral Partners - Partners who introduce customers to us,
to whom we then sell direct. These include Master Agents,
consultants, as well as other organisations who may prefer to first
introduce, prior to becoming a fully enabled reseller.
-- Technology Partners - typically these are major technology
vendors, such as Oracle, with whom we have sought technology
accreditations that allow us to sell to both their own partner
communities and also major enterprise customers.
The business has balanced its investment and time-focus across
two initiatives with our partners in the year. Firstly, focused
effort to capitalise on the true depth of relationships with
partners, many of whom are multi-national large organisations; and
secondly, to strategically target new partners with whom we seek to
work with and whose customers include organisations that takes
payments across business communications environments.
The year has seen good progress against both of those
initiatives. We have signed a number of new target partners in the
period, including a major vendor in the government IT services
sector in the US, a European headquartered global leader in the
enterprise technology in the travel space, and numerous regional
Solution Provider vendors. Additionally, we have been successful in
expanding and further deepening our relationships with a number of
existing global partners. We continue to both progress and build
our pipeline of new partner accounts as we enter the new financial
year.
We work in a highly collaborative way with our partners with our
marketing efforts closely aligned to our sales goals. A channel
marketing highlight of the year was the establishment and launch of
our first virtual conference "Payments: The Future of Security and
CX". The event was the first of its kind in our space, where we had
the majority of our global partners not only in attendance but many
taking speaking slots to discuss the relationship between security
and CX, and the challenges that companies face in achieving both to
a high standard whilst still commercialising their activities. In
attendance at the event were Worldpay, Verizon, PayPal, Calabrio,
Talkdesk, 8x8, Capita, Civica, NICE inContact, and Oracle, as well
as a keynote from our Advisory Committee representative, payments
expert, Neira Jones. We look forward to the FY 2022 event.
Operations
PCI Pal is growing strongly with more and more customers
choosing our solutions to secure their payments and data.
Operationally we have already made many changes to grow with this
demand. Notably, this year we took the decision to further evolve
how we engage with our partners and customers to give us the
framework to continue to maintain low churn rates and drive
positive net retention rates. Therefore we have created Customer
Success as a department within the business, incorporating the
three key functions of Professional Services, Service Excellent (or
Service Desk), and Relationship Management:
Professional Services
The Professional Services team is responsible for the deployment
of our solutions once signed. It was another excellent year of
progress and the team has worked fantastically in spite of the
restrictions placed on our partners and customers due to the
pandemic. In the last two years, we have invested extensive time in
understanding, controlling, and improving our key delivery metric
of time-to-go-live ("TTGL"). In the year we signed nearly twice the
number of new customers as the prior year, yet due to our
substantial operational improvements since we introduced the TTGL
metric, we were able to maintain it at the same highly improved
level as last year at 5 months on average. These new customers
accounted for GBP3.6 million in annual recurring revenue showing
the value we have built in our professional services
capabilities.
At PCI Pal, we are hugely passionate about hiring and we see
every new vacancy as an opportunity to add value to this business.
We have expanded both UK and US professional services teams in line
with our plans and we have been successful in on-boarding these
people to their new roles and ensuring they are up to our required
level of service excellence to engage with our customers. In
addition to our strong performance against TTGL, our Net Promoter
Scores for our project engagement activities remain high at 58%
above global benchmarks illustrating the customer satisfaction
following their go live with of our services.
Service Excellence
Since the launch of the AWS platform in late 2017 the Group has
expanded its customer base significantly. I am proud of what we
have achieved to date and how our professional services team
delivers our solutions. However, as a business we need to drive
more focus into supporting these deployed customers and their
technical requirements. Previously, our support team had been part
of the professional services department, however we have recently
brought support into its own centre of excellence, headed by a VP.
That VP's task is to structure our support function for the future
allowing us to provide worldwide support. We will be separately
measuring their performance via customer satisfaction (CSAT)
surveys, as well as expanded NPS scoring to ensure that they meet
our high expectations of service as we increase our focus on churn
and retention metrics.
Relationship Management
The Professional Services and Service Excellence teams are the
foundations to establishing partner and customer relationships in
the right way, leading to achieving the long-term adoption of our
solutions and customer loyalty. The third leg of the changes being
introduced is the creation of a dedicated account management
function with the planned hiring of regional Success Managers.
These Success Managers will work closely with our partners and
customers to ensure they are successful in using our products and
services.
Over time, our increased focus and investment in the Customer
Success function will help us protect our low churn rates and drive
positive net retention. Already PCI Pal achieves positive net
customer retention, with a net retention rate in the year of
111.1%. We are using this opportunity to disclose our retention
metric for this last financial year for the first time as well as
installing it as a key metric for the business to focus on going
into FY22.
Completing the changes and additions, since the year end, we
announced that we had added two new members to the PCI Pal Advisory
Committee. Emilia D'Anzica has more than twenty years' experience
in Customer Success, which today includes being founder of her own
West Coast US-based consultancy, and in the past has included
senior roles at a number of high-growth SaaS companies in the
United States, including WalkMe the Forbes Cloud 100 unicorn. So,
the addition of Emilia to our resources on the PAC is the final
piece in the business' current plan to create the starting
foundations to on-going excellence in customer success.
Infosec
Paramount, and an intrinsic part of everything we do, is the
security of our services and cloud platform. We achieved
certification for the fourth year running against the current
version of the Payment Card Industry Data Security Standards (PCI
DSS) for our AWS cloud platform since its full launch; and for the
nineth year running for our first-generation platform. This
certification testifies that PCI Pal is the highest level of
security required under PCI DSS and, as a Service Provider, can
therefore handle payment data for any size organisation across the
globe.
In addition to PCI DSS, we continue to maintain a variety of
globally-recognised standards, including ISO27001 (Information
Security Management Systems), ISO22301 (Business Continuity),
ISO9001 (Quality Management Systems), and ISO14001 (Environmental
Management). In totality our accreditations not only bolster our
own processes but ensure that our partners and customers have
points of reference to recognisable standards by which the Company
operates when they are procuring our services.
Outlook
After a strong year I believe that the business is set to take
another sizeable step forward in the next financial year. Whilst we
do continue to be mindful of the pandemic, we believe that the
momentum we have built, together with our ability to deliver new
customer deployments, and our near-term sales pipelines means we
are well-positioned to have another year of substantial
progress.
Since the year end, we have already concluded a number of
notable new sales, including: a competitive enterprise win to
provide our Agent Assist services to a NASDAQ-listed hosting
provider covering customer's contact centres in both the UK and US;
and a competitor displacement at a new partner, which has resulted
in the new partnership's first customer contract. This new partner
is a Genesys VAR in the US. and the customer is using our recently
announced improved combined product offering with the Genesys
Cloud.
Operationally, following the fund raise, we have started to
implement the new geographic expansion and other strategic plans
set out to investors at the time of the raise. Our people remain
key to helping us deliver on these enhanced plans and, so far in
the new financial year, we have already found and hired several
key, talented people to help us achieve this. I am therefore
confident in the long-term future of the business as we continue
driving sustained revenue growth capitalising on the foundations we
have built. I look forward to updating investors further on
progress throughout FY22.
James Barham
Chief Executive Officer
CHIEF FINANCIAL OFFICER'S REVIEW
FOR THE YEARED 30 JUNE 2021
Key financial performance indicators
The Directors use several Key Financial Performance Indicators
(KPIs) to monitor the progress and performance of the Group, its
subsidiaries and targets. All the core KPIs are showing top
quartile performance against expectations.
The principal financial KPIs are as follows:
2021 Change 2020 Change 2019
% %
Revenue GBP7.36m +67% GBP4.40m +56% GBP2.82m
----------------- ------------- ----------------- ------------- -----------------
Gross Margin 76% +9% 69% +15% 60%
----------------- ------------- ----------------- ------------- -----------------
Annual Recurring
Revenue (1) GBP6.48m +75% GBP3.70m +56% GBP2.37m
----------------- ------------- ----------------- ------------- -----------------
Annual recurring
revenue as % of
Revenue 88% 84% 84%
----------------- ------------- ----------------- ------------- -----------------
Revenue generated
from Non-UK deployments GBP2.06m +280% GBP0.76m +400% GBP0.31m
----------------- ------------- ----------------- ------------- -----------------
Percentage of Revenue
from non-UK deployments 28% 17% 11%
----------------- ------------- ----------------- ------------- -----------------
Adjusted EBITDA(2) (GBP2.56m) +28% (GBP3.57m) +20% (GBP4.44m)
----------------- ------------- ----------------- ------------- -----------------
Cash facilities GBP7.52m GBP5.55m GBP1.49m
available(3)
----------------- ------------- ----------------- ------------- -----------------
Deferred Income GBP8.09m GBP4.53m GBP2.45m
----------------- ------------- ----------------- ------------- -----------------
(1) Annual Recurring Revenue is the revenue generated from the
recurring elements of the contracts held by the Group and
recognised in the Statement of Comprehensive Income
(2) Adjusted EBITDA is the loss on Operating Activities before
depreciation and amortisation, exchange movements charged to the
profit and loss and expenses relating to share option charges
(3) Cash balance plus undrawn debt facilities
The principal operational KPIs are as follows:
2021 Change 2020 Change 2019
% %
Contracted TACV(1) GBP7.69m +90% GBP4.04m Not Calculated
deployed and live
--------------- ------------- --------------------- ------------- ---------------------
Contracted TACV GBP1.12m -49% GBP2.19m Not Calculated
in deployment
--------------- ------------- --------------------- ------------- ---------------------
Contracted TACV GBP0.70m +34% GBP0.52 Not Calculated
- projects on
hold
--------------- ------------- --------------------- ------------- ---------------------
Total Contracted
TACV GBP9.51m +41% GBP6.75m +66% GBP4.06m
--------------- ------------- --------------------- ------------- ---------------------
ACV of contracts GBP0.2m Not Calculated Not Calculated
cancelled before
deployment
--------------- ------------- --------------------- ------------- ---------------------
Signed ACV in
financial period GBP3.11m +19% GBP2.62m +37% GBP1.91m
--------------- ------------- --------------------- ------------- ---------------------
AWS Platform 6.7% Not Calculated Not Calculated
Churn(2)
--------------- ------------- --------------------- ------------- ---------------------
AWS Platform Net 111.1% Not Calculated Not Calculated
Retention Rate(3)
--------------- ------------- --------------------- ------------- ---------------------
Headcount at end
of year
(excluding
non-executive
directors) 71 58 50
--------------- ------------- --------------------- ------------- ---------------------
Ratio Personnel
cost to
administrative
expenses 71% 77% 70%
--------------- ------------- --------------------- ------------- ---------------------
(1) TACV is the total annual recurring revenue of all signed
contracts, whether invoiced and included in deferred revenue or
still to be deployed and/or not yet invoiced
(2) AWS platform churn is calculated using the ACV of lost
deployed contracts in the period divided by the opening total value
of deployed contracts at the start of the period
(3) AWS platform net retention rate is calculated using the
opening total value of deployed contracts at the start of the
period less the ACV of lost deployed contracts in the period plus
the ACV of upsold contracts signed in the period all divided by the
opening total value of deployed contracts at the start of the
period
Revenue and gross margin
Overall Group revenue grew by 67% to GBP7.36 million (2020:
GBP4.40 million) and gross margin improved to 75% (2020: 69%) as
more revenue continued to be generated from the AWS platform. The
first-generation platform, which we have not proactively sold since
2019, now accounts for 24% of revenues (2020: 48%).
The Group launched its first international operation in February
2018 in North America, and I am pleased to say that revenues are
growing strongly in this region. Since then, we have also generated
revenue in Australia, which is progressing well in preparation for
our planned increased investment in that territory later in FY
2022. Revenues from our non-UK customers now make up 28% (2020:
11%) of the overall Group revenues. Over the next few years, the
revenues generated from our international operations are expected
to continue to grow strongly as we strengthen our position in the
United States and invest in expanding our services more into
Canada, Australia and into mainland Europe.
The Group's revenue reflects its SaaS business model. It
delivers its services primarily through channel partners into
contact centres who are predominantly charged on a recurring
licence basis. The terms of the sales contracts generally allow for
automatic renewal of the licences for a further 12-month period at
the end of their initial term. 88% (2020: 84%) of revenues come
from annually recurring licences and transactions giving the Group
high future revenue visibility.
ACV growth
Annual Contract Value ("ACV") growth is a key leading growth
metric of the Group. Contracts signed in the financial year begin
to filter through on a monthly basis into recognised revenue
currently after an average of 26 weeks. ACV grew by 19% in the year
to GBP3.11 million (2020: GBP2.62 million) positively reflecting
the successful evolution the sales and marketing operations had to
undertake to reflect the changing working environments driven by
the COVID 19 pandemic.
TACV
TACV at the end of the financial year increased 41% to GBP9.51
million (2020: GBP6.75 million). This metric is a key indicator of
our accumulating ability to reach future cash flow and then profit
break-even as customers go live with our services. Growing levels
of TACV produces increasing levels of future revenue visibility, an
attractive aspect of the Group's business model.
This GBP9.51 million of TACV is analysed as follows:
2021 2020
GBP7.69 million GBP4.04 million Live and delivering monthly revenue
---------------------- --------------------------------------------
GBP1.12 million GBP2.19 million Mid-deployment and therefore expected
to deliver revenues in the next
few months
---------------------- --------------------------------------------
GBP0.70 million GBP0.52 million Classed as on hold
---------------------- --------------------------------------------
Contracts are typically on hold as a result of a lack of
resource with the customer and/or channel partner, or where our
solution is part of a larger project being delivered by our partner
or the customer, which may mean there is a delay in reaching the
PCI Pal aspect of the project. Such on-hold contracts therefore
take longer to start delivering recurring recognised revenues.
As with any internationally expanding business, exchange rates
can disproportionally affect the reporting of Group numbers as
assets and sales are translated into pounds sterling for reporting
purposes. During the financial year we saw the US dollar exchange
rate increase from $1.25 to $1.40 which had the effect of reducing
the sterling value of the US denominated contracts for TACV
purposes by approximately GBP0.26m from the original internal
expectations set using the $1.25 original exchange rate.
Churn and Net Retention
On the launch of the AWS platform in October 2017, the Group
initially focused its resources on signing new contracts with new
logo customers. However, as the number of contracts grow and are
deployed, we are seeing requests for additional licences, as our
customers grow or introduce us to other parts of their own groups,
or purchase new products from us, such as PCI Pal Digital or
Speech. These upsell contracts are now an important part of the
Group's ACV sales and in FY21 represented GBP0.54 million of the
GBP3.11 million total.
For the AWS platform, upsells in the financial year to customers
that have gone live were far greater than contract losses leading
to a positive net retention of 111.1%.
The pandemic naturally put pressure on some of our customers,
for example those in the travel and hospitality sector. During the
year we agreed to terminate GBP0.20 million of contracts prior to
them going live due to changes in circumstances from the original
expectations. Overall churn on the AWS platform in the year from
contracts that had gone live was 6.7%.
Adjusted operating loss(1)
Adjusted operating loss for the Group changed as follows for the
year:
EMEA North America Central Total
GBP000s GBP000s GBP000s GBP000s
-------------- -------------------- -------------- --------------
2021
-------------- -------------------- -------------- --------------
Loss from Operating Activities (866) (1,977) (1,118) (3,961)
-------------- -------------------- -------------- --------------
Exchange rate movements (12) 562 - 550
-------------- -------------------- -------------- --------------
Expenses relating to Share
Options - - 115 115
-------------- -------------------- -------------- --------------
Adjusted operating loss (878) (1,415) (1,003) (3,296)
-------------- -------------------- -------------- --------------
2020
-------------- -------------------- -------------- --------------
Loss from Operating Activities (1,330) (2,081) (800) (4,211)
-------------- -------------------- -------------- --------------
Exchange rate movements 18 (35) 2 (15)
-------------- -------------------- -------------- --------------
Expenses relating to Share
Options - - 108 108
-------------- -------------------- -------------- --------------
Adjusted operating loss (1,312) (2,116) (690) (4,118)
-------------- -------------------- -------------- --------------
Change in year 434 701 (313) 822
-------------- -------------------- -------------- --------------
(1) Loss from Operating Activities before exchange losses/gains
recorded in the profit and loss and share option charges
Adjusted EBITDA
EMEA North America Central Total
GBP000s GBP000s GBP000s GBP000s
-------------- -------------------- -------------- --------------
2021
-------------- -------------------- -------------- --------------
Adjusted operating loss
(from above) (878) (1,415) (1,003) (3,296)
-------------- -------------------- -------------- --------------
Depreciation and amortization 692 48 0 740
-------------- -------------------- -------------- --------------
Adjusted EBITDA (186) (1,367) (1,003) (2,556)
-------------- -------------------- -------------- --------------
2020
-------------- -------------------- -------------- --------------
Adjusted operating loss
(from above) (1,312) (2,116) (690) (4,118)
-------------- -------------------- -------------- --------------
Depreciation and amortization 528 16 0 544
-------------- -------------------- -------------- --------------
Adjusted EBITDA (784) (2,100) (690) (3,574)
-------------- -------------------- -------------- --------------
Change in year 598 733 (313) 1,018
-------------- -------------------- -------------- --------------
EMEA
The EMEA region's Adjusted Operating Loss decreased by GBP0.43
million in the year to GBP0.88 million (2020: GBP1.31 million). The
region continued to deliver strong revenue which grew by 40% to
GBP5.46 million (2020: GBP3.89 million) resulting in an improvement
of GBP1.22 million in Gross Profit at a margin of 70% (2020:
67%).
Administrative costs, before exchange movements, grew by GBP0.79
million to GBP4.69 million primarily reflecting a further
investment in personnel, especially in the Engineering and
Professional Services departments.
Depreciation and amortisation costs were GBP0.69 million (2020:
GBP0.53 million) meaning that the EMEA operation recoded an
adjusted EBITDA loss of GBP0.19 million (2020: GBP0.78
million).
North America
The North America region's Adjusted Operating Loss (which
includes the Australia trading results) decreased by GBP0.70
million in the year to GBP1.42 million (2020: GBP2.12 million). The
region continued to deliver strong revenues which grew by GBP1.40
million to GBP1.91 million resulting in an improvement of GBP1.29
million in Gross Profit at a margin of 92% (2020: 90%).
Administrative costs before exchange movements grew by GBP0.59
million to GBP3.16 million primarily reflecting a further
investment in personnel especially in marketing and professional
services.
Depreciation and amortisation costs were GBP0.04 million (2020:
GBP0.02 million) meaning that the North American operation recoded
an adjusted EBITDA loss of GBP1.37 million (2020: GBP2.10
million).
Central
Costs for the Central operation relate to the PLC activities of
being a listed company only, including the majority of the
employment costs of James Barham (CEO) and myself, as well as the
three non-executive directors.
Further segmental information is shown in Note 9.
Administrative expenses
Total statutory administrative expenses were GBP9.52 million
(2020: GBP7.25 million), an increase of 31%. Of the GBP2.27 million
increase, GBP0.56 million related to the movement in exchange rates
and GBP0.01 million to the movement in share option charges. The
underlying increase was therefore GBP1.7 million, of which GBP0.76
million was from the overall increase in personnel costs as the
Group moved from 58 employees to 71 employees at the end of the
financial year. The cost to run the AWS platform (including the
development and staging systems) in the year was GBP0.9 million, an
increase of GBP0.4 million over the prior year. Depreciation and
amortisation increased by GBP0.2m to GBP0.74 million.
Personnel costs charged to the Comprehensive Income Statement
(including commission, bonuses and travel and subsistence expenses)
were GBP6.30 million (2020: GBP5.54 million), and GBP0.79 million
(2020: GBP1.00 million) of the personnel costs were capitalised as
Development costs. These personnel costs make up 71% (2020: 77%) of
the administrative costs of the business. Travel expenditure fell
to GBP0.03 million (2020: GBP0.26 million) due to the restrictions
enforced during the pandemic.
Administrative expenses in FY22
Following the successful equity placing in April 2021, the Group
raised a net GBP5.18 million to fund its expansion into Canada,
Australia and mainland Europe as well as strengthen the product
engineering teams and launch the customer success initiatives. As a
result, it is planned that headcount will increase in the coming
year and so administrative expenses will also increase
proportionately. This investment is expected to lay the foundations
for the Group's future growth in FY23 and beyond.
Changes in accounting policies
During FY21 our accounting policy relating to the treatment of
initial set up fees relating to contracts signed was amended. We
deemed this change immaterial to the financial results. There are
no changes in our accounting policies anticipated for FY22.
Capital expenditure
As required by IAS 38, the Group capitalised a further GBP0.79
million (2020: GBP1.00 million) in development expenditure as we
continue to invest in the AWS cloud platform and introduce new
features and products. The Group also capitalised GBP0.13 million
(2020: GBPnil) of external contractor work relating to the Group's
new website and management reporting systems.
Other capital expenditure relating to computer equipment was
GBP0.04 million (2020: GBP0.03 million). Most of this expenditure
related to new laptops for the new staff who joined in the
year.
Set-up and Professional Services Fees
During the financial year, the Group generated GBP1.63 million
(2020: GBP1.29 million) of set-up and professional services fees.
These fees are initially held in the balance sheet as deferred
income and then released to revenue over the economic length of the
contract as governed by the IFRS 15 accounting standard.
Deferred income
Deferred income increased 79% to GBP8.09 million (2020: GBP4.53
million), mostly reflecting the significant growth in new business
sales and the consequent increase in licence fees invoiced in
advance, as well as the continued build-up of set up and
professional services fees which are invoiced on signature of a
contract then released over the length of the contract, as required
by IFRS15.
Trade receivables
Trade receivables grew to GBP2.14 million (2020: GBP1.26
million) as the business expanded its contract base. The level of
receivables reflects both debtors generated from new business sales
as well as existing contract renewals outstanding at the end of the
period. As at the 30 June 2021, GBP0.61 million of the outstanding
debtors related to newly signed contracts.
Our debtor collection rates remain high ending the year with 91%
(2020: 89%) of debtors less than 60 days old. There were no debtors
outstanding more than 120 days at the year end.
Taxation
During the year the UK entity received GBP0.15 million (2020:
GBP0.22 million) as an R & D tax credit from HMRC relating to
the financial year ended 30 June 2019. An application is being made
relating to the financial year ended 30 June 2020, the amount of
which is currently unknown.
Cashflow and liquidity
Cash as at 30 June 2021 was GBP7.52 million (2020: GBP4.30
million).
In April 2021 the Group conducted an equity placing of 5.789
million shares at 95 pence per share to raise GBP5.50 million
(GBP5.18 million net of expenses). During the year, the Group also
received GBP0.10 million from the exercise of share options.
In FY21 the Group generated GBP0.25 million (2020: used GBP1.76
million) of cash from its operating activities in spite of
recording a statutory pre-tax loss of GBP4.07 million (2020:
GBP4.13 million). The strong cash generation is primarily driven by
our SaaS business model that typically invoices in advance for the
solutions sold.
The Group's strong cash generation allowed it to repay in full
its outstanding loan that was taken out in September 2019, without
penalty.
Going Concern considerations
The Board of Directors continue to monitor the Groups trading
performance carefully. It also reviews the potential impact of the
COVID-19 pandemic, however, the challenges the business faced from
the pandemic in FY21 have diminished as the year progressed and
greater understanding of the risks were developed.
Since the start of the outbreak, the pandemic has not had a
significant impact on the Group's financial performance. The
business was able to transition to home working with relative ease.
Before the pandemic, some 60% of our employees already worked from
home and it was therefore relatively easy to migrate the other 40%
to home working as we already provide employees with laptops and
cloud access to all core systems and documents. More importantly,
our solutions are purely delivered through the Cloud and deployed
remotely. Not having to visit our customers premises to install or
maintain our solutions has been a significant advantage to both
ourselves, our partners and customers in the pandemic.
During the year the Group continued to win new contracts
recording new ACV sales of GBP3.11 million, while also deploying
new customers with annual recurring revenue value of GBP3.65m, all
achieved with our teams working fully from home. At the end of the
financial year we had GBP7.69 million of deployed live contracts
which help underpin our expectations for growth in FY22.
The Group has clearly had to adapt how it works as a business,
with greater usage of video conferencing, which has reduced the
travel expenditure year on year by 80%. We adjusted our marketing
strategy increasing our digital marketing efforts and virtual
collaboration with channel partners, which has contributed
substantially to our continued strong growth.
As a result of the actions taken, and the robust trading
performance in FY21, the Company has not had to furlough any of its
employees, and in fact it has continued to hire, growing resources
to help cope with the additional demand for our solutions. The
Group has not taken out any government-backed loans, but it did
take advantage of some of the tax payment deferrals that are
available, such as VAT deferment in the UK. All these deferments
had been fully caught up prior to the financial year end.
With the Group year-end being 30 June, the Group normally
prepares its next financial year budgets in the April to June
period. Historically, this has been undertaken face-to-face with
all managers meeting in one location. In FY21, due to the pandemic,
the budget sessions were moved to video conference, where the
management team presented and discussed their departmental plans
remotely from across the UK and US, where they are located. The
Budget process for FY22 was undertaken in a similar remote
manner.
Following the equity placing, the Group finished the year with a
cash balance of GBP7.52 million and no debt. The new funds raised
are to be used to further expand the Group internationally and to
underpin its product management and customer success capabilities.
Therefore, for this year's budget, the focus has been to build on
the FY21 robust performance and to build in the plans for
international expansion. The budget has, therefore, made certain
assumptions based on the performance in FY21 as well as a
controlled expansion of headcount, which will significantly
increase in FY22.
The Board considered the budget presentation in June and the
controls in place that are designed to allow the Group to control
its overhead expenditure while still maintaining its momentum and
delivering market forecasts. Particular attention was paid to the
potential sensitivity impacts of any adverse movement in sales and
customer deployments might have on the Group's net cash position
and the level of headroom achieved.
The Board also considered actions that could be taken to help
mitigate the resulting loss in sales. At all points the Directors
were satisfied in the robustness of the Group's financial position
from the presented plans which, they believe, take a balanced view
of the future growth prospects, together with the contingencies
that can be taken if the budget assumptions prove to be materially
inaccurate.
The Directors therefore have a reasonable expectation that the
Group has adequate resources to continue in operational existence
for the foreseeable future. For these reasons, the Directors
continue to adopt the going concern basis in preparing the
accounts.
Dividend
The Board is not recommending a dividend for the financial year
(2020: GBPnil).
William Good
Chief Financial Officer
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEARED 30 JUNE 2021
Note 2021 2020
GBP000s GBP000s
Revenue 7,362 4,396
Cost of sales (1,805) (1,353)
------------------------------ -----------------------
Gross profit 5,557 3,043
Administrative expenses (9,518) (7,254)
------------------------------ -----------------------
Loss from Operating Activities (3,961) (4,211)
Adjusted Operating Loss (3,846) (4,103)
Expenses relating to Share
Options (115) (108)
------------------------------------------ ---- ------------------------------ -----------------------
Loss from Operating Activities (3,961) (4,211)
------------------------------------------ ---- ------------------------------ -----------------------
Finance income 6 - 1
Finance expenditure 7 (230) (140)
------------------------------ -----------------------
Loss before taxation 5 (4,191) (4,350)
Taxation 11 154 221
------------------------------ -----------------------
Loss for the year (4,037) (4,129)
Other comprehensive expense:
Items that will be reclassified
subsequently to profit or
loss
Foreign exchange translation
differences 653 (49)
------------------------------ -----------------------
Total other comprehensive
income/(expense) 653 (49)
------------------------------ -----------------------
Total comprehensive loss attributable
to equity holders for the
period (3,384) (4,178)
Basic and diluted earnings
per share 10 (6.64) p (8.84) p
The accompanying accounting policies and notes form an integral
part of these financial statements.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2021
Note 2021 2020
GBP000s GBP000s
ASSETS
Non-current assets
Plant and equipment 13 74 103
Intangible assets 12 2,366 2,139
Trade and other receivables 14 801 368
Deferred taxation 17 - -
Non-current assets 3,241 2,610
------------ -----------
Current assets
Trade and other receivables 14 2,928 2,343
Cash and cash equivalents 7,518 4,301
------------ -----------
Current assets 10,446 6,644
------------ -----------
Total assets 13,687 9,254
LIABILITIES
Current liabilities
Trade and other payables 15 (7,817) (5,194)
Current portion of long-term
borrowings 15 - (545)
------------ -----------
Current liabilities (7,817) (5,739)
------------ -----------
Non-current liabilities
Other payables 16 (1,941) (875)
Long term borrowings 16 - (728)
------------ -----------
Non-current liabilities (1,941) (1,603)
------------ -----------
Total liabilities (9,758) (7,342)
------------ -----------
Net assets 3,929 1,912
CONSOLIDATED STATEMENT OF FINANCIAL POSITION (Continued)
AS AT 30 JUNE 2021
Note 2021 2020
GBP000s GBP000s
EQUITY
Share capital 19 655 594
Share premium 14,243 9,018
Other reserves 404 289
Currency reserves 466 (187)
Profit and loss account (11,839) (7,802)
---------- ------------
Total equity 3,929 1,912
The Board of Directors approved and authorised the issue of the
financial statements on 3 September 2021.
J Barham
Director
T W Good Director
The accompanying accounting policies and notes form an integral
part of these financial statements.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEARED 30
JUNE 2021
Profit and Currency
Share Share Other reserves loss account Reserves Total Equity
capital premium
GBP000s GBP000s GBP000s GBP000s GBP000s GBP000s
Balance as at
1 July
2019 427 4,618 181 (3,673) (138) 1,415
Share Option
amortisation
charge - - 108 - - 108
New shares
issued
net of costs 167 4,400 - - - 4,567
Transactions
with
owners 167 4,400 108 - - 4,675
Foreign
exchange
translation
differences - - - - (49) (49)
Loss for the
year - - - (4,129) - (4,129)
----------------- ----------------- ----------------- -------------- ---------- --------------
Total
comprehensive
loss - - - (4,129) (49) (4,178)
----------------- ----------------- ----------------- -------------- ---------- --------------
Balance at 30
June
2020 594 9,018 289 (7,802) (187) 1,912
Share Option
amortisation
charge - - 115 - - 115
New shares
issued
net of costs 61 5,225 - - - 5,286
Transactions
with
owners 61 5,225 115 - - 5,401
Foreign
exchange
translation
differences - - - - 653 653
Loss for the
year - - - (4,037) - (4,037)
----------------- ----------------- ----------------- -------------- ---------- --------------
Total
comprehensive
loss - - - (4,037) 653 (3,384)
----------------- ----------------- ----------------- -------------- ---------- --------------
Balance at 30
June
2021 655 14,243 404 (11,839) 466 3,929
----------------- ----------------- ----------------- -------------- ---------- --------------
The accompanying accounting policies and notes form an integral
part of these financial statements.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARED 30 JUNE 2021
2021 2020
GBP000s GBP000s
Cash flows from operating activities
Loss after taxation (4,037) (4,129)
Adjustments for:
Depreciation of equipment and fixtures 69 82
Amortisation of intangible assets 76 29
Amortisation of capitalised development 595 433
Interest income - (1)
Interest expense 206 126
Exchange differences 676 (49)
Income taxes (154) (221)
Share based payments 115 108
Increase in trade and other receivables (1,017) (713)
Increase in trade and other payables 3,721 2,575
--------------------- ---------
Cash generated/(used) in operating activities 250 (1,760)
Dividend paid - -
Income taxes received 154 221
Interest paid (206) (126)
--------------------- ---------
Net cash generated/(used) in operating
activities 198 (1,665)
--------------------- ---------
Cash flows from investing activities
Purchase of equipment and fixtures (40) (33)
Purchase of intangible assets - (296)
Development expenditure capitalised (920) (1,004)
Interest received - 1
--------------------- ---------
Net cash used in from investing activities (960) (1,332)
Cash flows from financing activities
Issue of shares 5,608 5,000
Expenses related to issue of shares (323) (432)
Drawdown on loan facility 1,250 1,500
Repayment of loan facility (2,523) (227)
Principal element of lease payments (33) (35)
Net cash generated from financing activities 3,979 5,806
------- -------
Net increase in cash 3,217 2,809
Cash and cash equivalents at beginning
of year 4,301 1,492
Net increase in cash 3,217 2,809
------- -------
Cash and cash equivalents at end of
year 7,518 4,301
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARED 30
JUNE 2021
1. AUTHORISATION OF FINANCIAL STATEMENTS
In accordance with section 435 of the Companies Act 2006, the
Directors advise that the financial information set out in this
announcement does not constitute the Group's statutory financial
statements for the year ended 30 June 2021 or 2020, but is derived
from these financial statements. The financial statements for the
year ended 30 June 2020 have been audited and filed with the
Registrar of Companies. The financial statements for the year ended
30 June 2021 have been prepared in accordance with international
accounting standards in conformity with the requirements of the
Companies Act 2006. The financial statements for the year ended 30
June 2021 have been audited and will be filed with the Registrar of
Companies following the Company's Annual General Meeting. The
Independent Auditors Report on the Group's statutory financial
statements for the years ended 30 June 2021 and 2020 were
unqualified and did not draw attention to any matters by way of
emphasis and did not contain statements under Section 498 (2) or
(3) of the Companies Act 2006.
2. NATURE OF OPERATIONS AND GENERAL INFORMATION
PCI-PAL PLC is the Group's ultimate parent company. It is a
public limited company incorporated and domiciled in the United
Kingdom. PCI-PAL PLC's shares are quoted and publicly traded on the
AIM division of the London Stock Exchange. The address of PCI-PAL
PLC's registered office is also its principal place of
business.
The Company operates principally as a holding company. The main
subsidiaries provide organisations globally with secure cloud
payment and data protection solutions for any business
communication environment.
3. STATEMENT OF COMPLIANCE WITH IFRS
The principal accounting policies adopted by the Group are set
out in note 4. The accounting policies have been applied
consistently throughout the Group for the purposes of preparation
of these financial statements.
Standards and interpretations in issue but not yet effective
At the date of authorisation of these financial statements,
there are several new standards and interpretations in issue that
not yet effective or are effective but are not relevant or material
to the Group.
4. PRINCIPAL ACCOUNTING POLICIES
a) Basis of preparation
The financial statements have been prepared on a going concern
basis in accordance with the accounting policies set out below.
These are based in accordance with international accounting
standards in conformity with the requirements of the Companies Act
2006.
The financial statements are presented in pounds sterling (GBP),
which is also the functional currency of the parent company, and
under the historical cost convention.
b) Basis of consolidation
The Group financial statements consolidate those of the Company
and its subsidiary undertakings (see note 18) drawn up to 30 June
2021. A subsidiary is a company controlled directly by the Group
and all of the subsidiaries are 100% owned by the Group. Control is
achieved when the Group is exposed, or has rights, to variable
returns from its involvement with the investee and has the ability
to affect those returns through its power over the investee.
All intra-Group transactions, balances, income and expenses are
eliminated on consolidation.
Unrealised gains on transactions between the Group and its
subsidiaries are eliminated. Unrealised losses are also eliminated
unless the transaction provides evidence of an impairment of the
asset transferred. Amounts reported in the financial statements of
subsidiaries have been adjusted where necessary to ensure
consistency with the accounting policies adopted by the Group.
The Group has utilised the exemption (within IFRS 1) not to
apply IFRS to pre-transition business combinations. All other
subsidiaries are accounted for using the acquisition method.
c) Going concern
The financial statements have been prepared on a going concern
basis, which the Directors believe to be appropriate for the
following reasons:
The Group meets its day-to-day working capital requirements
through its cash balances and trading receipts. Cash balances for
the group were GBP7.518 million at the 30 June 2021.
The Directors have considered financial forecasts for the coming
year through to the end of October 2022. As part of these
considerations, the Directors reviewed information provided by the
management team such as the new contract sales forecast, the Group
current sales pipeline and the likely demand for our services and
any likely impact from the COVID 19 pandemic. The Board also
reviewed other risks within the business that could impact the
group's performance, such as insufficient numbers of employees to
ensure the company can deliver on its contractual obligations or
growth opportunities, as it continues to grow.
The Directors reviewed a range of reasonably possible
sensitivities in relation to the future business performance, as
detailed in the forecasts, and the resulting demands on the cash
resources detailed above.
The Board also looked at some more severe possibilities, where
new sales are much lower than presented in the forecast models. The
executive team detailed what actions and mitigations the business
could take in these circumstances to ensure the business could
continue to trade into the foreseeable future.
Based on these reviews, the Directors have concluded that the
group will be able to meet its' obligations as they fall due for
the foreseeable future (and in any event for no less than 12 months
from the date of approval of these financial statements) and
accordingly have elected to prepare the financial statements on a
going concern basis.
The Directors recognise that during the forthcoming year the
Group is expected to remain loss making on a month-to-month basis,
albeit with an improving trend. The Directors will review, on a
regular basis, the actual results achieved against the planned
forecasts. Some of the planned expenditure assumptions in the
current forecast remain discretionary and as a result the Directors
can delay such expenditure to further ensure the Group is able to
meet its day-to- day financial working capital needs.
d) Revenue
Revenue represents the fair value of the sale of goods and
services and after eliminating sales within the Group and excluding
value added tax or overseas sales taxes. The following summarises
the method of recognising revenue for the solutions and products
delivered by the Group.
The Group sells long-term secure payment and data protection
contracts that charge annual licence or monthly usage fees. The
payment profile for such contracts also typically includes payment
for one-off set up, professional services and installation fees
made at the point of signature of the contract. For revenue
recognition purposes, these one-off charges are deemed to be an
integral part of the wider contract rather than a separate
performance obligation.
(i) Revenue recognition of licence and usage fees
Revenue relating to the monthly element of the licence fee or
the monthly usage fees generated in the period will be recognised
monthly from the point the contract goes live or when the customer
takes over the solution for user acceptance testing.
(ii) Revenue recognition of the one-off set up fees
Revenue for the one-off set up, professional services and
installation fees will be deferred and will be recognised evenly
over the estimated term of the contract, having accounted for the
auto-renewal of our contracts. The estimated term of the contract
is typically four years, and will start being recognised as revenue
starting in the month following when the contract either goes live
or when the customer takes over the solution for user acceptance
testing. The Board has estimated that the four year period is
appropriate as a typical contract normally has a minimum term of
between 12 months and 36 months, but due to the automatic renewal
clause it is estimated to have a four year life as these contracts
will normally roll for a certain period.
There are two exceptions to the four year life estimation:
-- If the contract does not have an automatic renewal clause
then the deferral will be over the minimum term of that contract;
and
-- If the minimum term of the contract is greater than four
years, that minimum term period will be used as the estimated
length of the contract.
(iii) Third party equipment sales
Where the contract involves the sale of third-party equipment
that could be acquired and supplied by other parties to the client
the revenues and costs relating to this will continue to be
released in full to the Statement of Comprehensive Income at the
time the installation is complete.
e) Deferred Costs
Under IFRS 15 costs directly attributable to the delivery and
implementation of the revenue contracts, such as third-party costs,
will be deferred and will be recognised in the statement of
comprehensive income over the length of the contract.
Costs directly attributable to the delivery of the PCI
Compliance solutions and hosted telephony services will be
capitalised as 'costs to fulfil a contract' and released over the
estimated term of the contract, having accounted for the automatic
auto-renewal of our contracts, up to a maximum of four years,
starting the month following from the date of signature of the
underlying contract. If the minimum term of the contract is greater
than four years, the minimum term period will be used as the
estimated length of the contract.
Costs relating to commission costs earned by employees for
winning the contract will be capitalised as 'direct costs to obtain
a contract' at the date the commissions payments become due and
will be released to administrative expenses in monthly increments
over the estimated economic length of the contract, as defined in
4d above, starting the month following the date the cost is
capitalised.
f) Intangible assets
Research and development
Expenditure on research (or the research phase of an internal
project) is recognised as an expense in the period in which it is
incurred.
Development costs incurred are capitalised when all the
following conditions are satisfied:
-- completion of the intangible asset is technically feasible so
that it will be available for use or sale
-- the Group intends to complete the intangible asset
-- the Group is able to use or sell the intangible asset
-- the intangible asset will generate probable future economic
benefits. Among other things, this requires that there is a market
for the output from the intangible asset itself, or, if it is to be
used internally, the asset will be used in generating such
benefits
-- there are adequate technical, financial and other resources
to complete the development and to use or sell the intangible
asset
-- the expenditure attributable to the intangible asset during
the development can be measured reliably
The cost of an internally generated intangible asset comprises
all directly attributable costs necessary to create, produce and
prepare the asset to be capable of operating in the manner intended
by management. Directly attributable costs include, for example,
development engineer's salary and on-costs, such as pension
payments, employer's national insurance & bonuses, incurred on
software development.
The cost of internally generated software developments are
recognised as intangible assets and are subsequently measured in
the same way as externally acquired software. Where the internally
generated asset relates to on-going development of the platform,
the costs are capitalised and start to be amortised in the month
following. Where the costs relate to a longer term project the
costs will be capitalised and held as an intangible asset until the
project is launched. At that point the asset will start to be
amortised starting the month following the completion of the
project. Until completion of the development project, the assets
are subject to impairment testing only.
Amortisation commences upon completion of the asset and is shown
within administrative expenses in the statement of comprehensive
income. Amortisation is calculated to write down the cost less
estimated residual value of all intangible assets by equal annual
instalments over their expected useful lives. The rates generally
applicable are:
-- Development costs 20% to 33%
The Directors have reviewed the development costs relating to
the new AWS platform and are satisfied that the costs identified
meet the tests identified by IAS 38 detailed above. Specifically,
the initial platform was launched in October 2017 and has been
successfully sold in Europe, North America and Australia, with
further sales expected, as detailed in the Chief Executives'
statement. The Directors expect that the AWS platform will continue
to be developed, as more functionality is added, and as a result it
is expecting to continue to capitalise the development costs (which
are primarily labour costs) into the future.
Software licences
The cost of perpetual software licences acquired are stated at
cost, net of amortisation and any provision for impairment.
-- Software licences 20% to 30%
g) Land, building, plant and equipment
Land, buildings, plant and equipment are stated at cost, net of
depreciation and any provision for impairment.
Disposal of assets
The gain or loss arising on disposal of an asset is determined
as the difference between the disposal proceeds and the carrying
amount of the asset and is recognised in the statement of
comprehensive income.
Depreciation
Depreciation is calculated to write down the cost less estimated
residual value of all equipment assets by equal annual instalments
over their expected useful lives. The rates generally applicable
are:
* Fixtures and fittings 20% to 50%
Length of contract
* Right to use asset
* Computer equipment 33%
Material residual value estimates are updated as required, but
at least annually.
h) Leases
From 1 July 2019, each lease is recognised as a right-of-use
asset with a corresponding liability at the date at which the lease
asset is available for use by the Group. Interest expense is
charged to the consolidated income statement over the lease period
so as to produce a constant periodic rate of interest on the
remaining balance of the liability. The right-of-use asset is
depreciated over the shorter of the asset's useful life and the
lease term on a straight-line basis.
Assets and liabilities arising from a lease are initially
measured on a present value basis. The lease payments are
discounted using the interest rate implicit in the lease. If that
rate cannot be determined, the lessee's incremental borrowing rate
is used, being the rate that the lessee would have to pay to borrow
the funds necessary to obtain an asset of similar value in a
similar economic environment with similar terms and conditions.
Right-of-use assets are measured at cost comprising the amount
of the initial measurement of the lease liability, any lease
payments made at or before the commencement date less any lease
incentives received, plus any initial direct costs and restoration
costs. Where leases include an element of variable lease payment or
the option to extend the lease at the end of the initial term, each
lease is reviewed, and a decision is made on the likely term of the
lease.
Payments associated with short-term leases and leases of low
value assets are recognised on a straight-line basis as an expense
in the consolidated income statement.
i) Impairment testing of other intangible assets, plant and equipment
For the purposes of assessing impairment, assets are grouped at
the lowest levels for which there are separately identifiable cash
flows ("cash-generating units"). As a result, some assets are
tested individually for impairment and some are tested at
cash-generating unit level.
Intangible assets not yet available for use are tested for
impairment at least annually. All other individual assets or
cash-generating units are tested for impairment whenever events or
changes in circumstances indicate that the carrying amount may not
be recoverable.
An impairment loss is recognised for the amount by which the
asset's or cash-generating unit's carrying amount exceeds its
recoverable amount. The recoverable amount is the higher of fair
value, reflecting market conditions less cost to sell, and value in
use based on an internal discounted cash flow evaluation. Any
impairment loss is first applied to write down goodwill to nil and
then is charged pro rata to the other assets in the cash-generating
unit. With the exception of goodwill, all assets are subsequently
reassessed for indications that an impairment loss previously
recognised no longer exists.
j) Equity-based and share-based payment transactions
The Company's share option schemes allow employees to acquire
shares in PCI-PAL PLC to be settled in equity. The fair value of
options granted is recognised as an employee expense with a
corresponding increase in equity in the Company accounts. The fair
value is measured at grant date and spread over the period during
which the employees will be entitled to the options. The fair value
of the options granted is measured using either the Black-Scholes
option valuation model or the Monte Carlo option pricing model,
whichever is appropriate for the type of options issued. The
valuations consider the terms and conditions upon which the options
were granted. The amount recognised as an expense is adjusted to
reflect the actual number of share options that are expected to
vest.
k) Taxation
Current tax is the tax payable based on the loss for the year,
accounted for at the rates enacted at 30 June 2021.
Deferred income taxes are calculated using the liability method
on temporary differences. Deferred tax is generally provided on the
difference between the carrying amounts of assets and liabilities
and their tax bases. However, deferred tax is not provided on the
initial recognition of goodwill, nor the initial recognition of an
asset or liability, unless the related transaction is a business
combination or affects tax or accounting profit. In addition, tax
losses available to be carried forward as well as other income tax
credits to the Group are assessed for recognition as deferred tax
assets.
Deferred tax liabilities are provided in full, accounted for at
the rates enacted at 30 June 2021, with no discounting. Deferred
tax assets are recognised to the extent that it is probable that
the underlying deductible temporary differences will be able to be
offset against future taxable income. Current and deferred tax
assets and liabilities are calculated at tax rates that are
expected to apply to their respective period of realisation,
provided they are enacted or substantively enacted at the year
end.
Changes in deferred tax assets or liabilities are recognised as
a component of tax expense in the statement of comprehensive
income, except where they relate to items that are charged or
credited to other comprehensive income or directly to equity in
which case the related tax charge is also charged or credited
directly to other
comprehensive income or equity.
l) Dividends
Dividend distributions payable to equity shareholders are
included in "other short term financial liabilities" when the
dividends are approved in general meeting prior to the year end.
Interim dividends are recognised when paid.
m) Financial assets and liabilities
The Group classifies its financial assets under the definitions
provided in International Financial Reporting Standard 9 (IFRS 9),
depending on the purpose for which the financial assets were
acquired.
Management determines the classification of its financial assets
at initial recognition. Management considers that the Group's
financial assets fall under the amortised cost category. These are
non-derivative financial assets with fixed or determined payments
that are not quoted in an active market. They are included in
current assets, except for maturities greater than 12 months after
the statement of financial position date, which are classified as
non-current assets. The Group's financial assets held at amortised
cost arise principally through the provision of goods and services
to customers (e.g. trade receivables), but also incorporate other
types of contractual monetary asset. As such they comprise trade
receivables, other receivables and cash and cash equivalents.
Financial assets do not comprise prepayments.
The Group's financial assets are initially recognised at fair
value plus transaction costs that are directly attributable to
their acquisition or issue. The exception are trade and receivables
balances, which are recorded at their transaction price as they do
not contain a significant financing component. The Group's
financial assets are subsequently measured at amortised cost using
the effective interest rate method, less provision for
impairment.
Impairment provisions for trade receivables, being loss
allowances for 'expected credit losses' (ECLs) per IFRS 9, are
measured on a lifetime basis using the simplified approach set out
in that financial reporting standard. The Group's method in
measuring ECLs reflects:
-- unbiased and probability-weighted amounts, determined using a range of possible outcomes;
-- the time value of money; and
-- reasonable and supportable information that is available
without undue cost or effort at the reporting date about past
events, current conditions and forecasts of future economic
conditions.
The Group has applied the practical expedient in IFRS 9 of using
a provision matrix to calculate ECLs. This requires the use of
historical credit loss experience, as revealed for groupings of
similar trade receivable assets, to estimate the relevant ECLs. As
such, the Group has employed the following process in calculating
ECLs:
-- Default definition - amounts not collected are defined in
accordance with the credit risk management of the Group and include
qualitative factors, broadly encompassing scenarios where the
customer is either unable or unwilling to pay;
-- Customer contract position, whether the underlying contract has been deployed live or not;
-- Collection profiles and loss rates - the collection time
periods (e.g. within 30 days, 30 - 60 days, etc.) for sales made in
the preceding 12-month period are gathered, amounts not collected
assessed and loss rates based on ageing inferred;
-- Historical periods - historic losses are reviewed over a 3-year time horizon;
-- Forward-looking assessment - the Group considers relevant
future economic factors affecting each group of trade receivables,
giving an expected probability of default for the portfolio.
The resultant expected loss rates are applied to the ageing
profile of grouped trade receivables at the balance sheet date to
give the lifetime ECLs for each. This produces the loss allowances
to be booked as an impairment adjustment to the carrying value of
trade receivables.
Trade receivables are reported net of the resultant loss
allowances. The loss is recognised within administrative expenses
in the consolidated statement of comprehensive income. On
confirmation that the trade receivable will not be collectable, the
gross carrying value of the asset is written off against the
associated provision. Impairment provisions for other receivables
are recognised based on the general impairment model within IFRS
9.
The Group classifies its financial liabilities under the
definitions provided in IFRS 9. All financial liabilities are
recorded initially at fair value plus or minus directly
attributable transaction costs. Except where noted, such
liabilities are then measured at amortised cost using the effective
interest method.
Financial liabilities measured at amortised cost include trade
payables, bank loans and accruals. All financial liabilities are
recognised in the statement of financial position when the Group
becomes a party to the contractual provision of the instrument.
Financial liabilities do not comprise deferred income.
Unless otherwise indicated, the carrying values of the Group's
financial liabilities measured at amortised cost represents a
reasonable approximation of their fair values.
n) Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and on demand
deposits.
o) Equity
Equity comprises the following:
-- "Share capital" represents the nominal value of equity
shares. The shares have attached to them voting, dividend and
capital distribution (including on winding up) rights; they do not
confer any rights of redemption.
-- "Share premium" represents the difference between the nominal
and issued share price after accounting for the costs of issuing
the shares
-- "Other reserves" represents the cumulative charge for the
Company's share options
scheme
-- "Profit and loss account" represent retained cumulative
profits or losses generated by the Group
-- "currency reserves" represents exchange differences arising
from the translation of assets and liabilities of foreign
operations
p) Contribution to defined contribution pension schemes
The pension costs charged against profits represent the amount
of the contributions payable to the schemes in respect of the
accounting period.
q) Foreign currencies
Transactions in foreign currencies are translated into Sterling
at the exchange rate ruling at the date of the transaction.
Monetary assets and liabilities in foreign currencies are
translated into Sterling at the rates of exchange ruling at the
year end.
Any exchange differences arising on the settlement of monetary
items or on translating monetary items at rates different from
those at which they were initially recorded are recognised in the
statement of comprehensive income in the period in which they
arise.
The assets and liabilities of foreign operations, including
goodwill and fair value adjustments arising on consolidation, are
translated to the Group's presentational currency, Sterling, at
foreign exchange rates ruling at the balance sheet date. The
revenues and expenses of foreign operations are translated at the
exchange rate applicable at the date of the transactions. Exchange
differences arising from this translation of foreign operations are
reported as an item of other comprehensive income. Exchange
differences arising in respect of the retranslation of the opening
net investment in overseas subsidiaries are accumulated in the
currency reserve.
r) Significant estimates
In the application of the Group's accounting policies the
Directors are required to make estimates and assumptions about the
carrying amounts of assets and liabilities. The estimates and
associated assumptions are based on historical experience and other
commercial and market factors that are considered to be relevant.
Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an
ongoing basis, and at least annually. Revisions to accounting
estimates are recognised in the period in which the estimate is
revised if the revision affects only that period, or in the period
of the revision and future periods if the revision affects both
current and future periods. The key areas are summarised below:
Amortisation of capitalised development expenditure
Amortisation rates are based on estimates of the useful economic
lives and residual values of the assets involved. The assessment of
these useful economic lives is made by projecting the economic life
cycle of the asset which is subject to alteration as a result of
product development and innovation. Amortisation rates are changed
where economic lives are re-assessed and technically obsolete items
written off where necessary.
The remaining net book value of the capitalised development is
shown in Note 12
-- Alternative accounting estimates that could have been applied
- not capitalising development costs.
-- Effect of that alternative accounting estimates - reduction
of GBP2,100,000 of assets' carrying value.
Contract revenue and direct costs
The Group has adopted IFRS 15. A key estimate is the term used
to recognise deferred contract revenue and costs. Having reviewed
the terms and conditions of the Group's contracts it has estimated
that:
-- for contracts with defined termination dates, revenue will be
recognised over the period to the termination date
-- for rolling contracts with automatic renewal clauses, revenue
will be recognised over 4 years, representing the Directors'
current best estimate of a minimum contract term. The Board has
estimated that the four year period is appropriate as a typical
contract normally has a minimum term of between 12 months and 36
months, but due to the automatic renewal clause it is estimated to
have a four year life as these contracts will normally roll for a
certain period.
-- If the minimum term of the contract is greater than four
years, the minimum term period will be used as the estimated length
of the contract.
Associated direct costs such as commission costs directly linked
to individual contracts will be assessed and will also be deferred
over the same period.
-- Alternative accounting estimates that could have been applied
- this could be a longer period other than the four years
-- Effect of that alternative accounting estimate - decrease in
the revenue figure reported by an immaterial amount and an equal
increase in deferred income.
Deferred tax
The calculation of the deferred tax asset involved the
estimation of future taxable profits. In the year, the Directors
assessed the carrying value of the deferred tax asset and decided
not to recognise the asset, as the utilisation of the assets was
unlikely in the near future. The Directors have reached the same
conclusion for this accounting period and so no asset has been
recognised.
-- Alternative accounting estimate that could have been applied - recognition of the asset
-- Effect of that alternative accounting estimate - creation of
a deferred tax asset of GBP4,364,000 and corresponding change in
the tax charge reported.
Leases & adoption of IFRS 16
The Group has adopted IFRS 16: Leases. The Directors have
determined the only operating lease within the Group relates to its
commercial offices in Ipswich. These leases do not have an implied
interest rate and so the management have estimate that a rate of
12% should be used as the discount rate to calculate the lease
liabilities for each of the leases. This rate was obtained using
the underlying rate of interest applied to the historic bank loan
facilities.
-- Alternative accounting estimate that could have been applied
- use of a lower or higher discount rate
-- Effect of that alternative accounting estimate -
corresponding change in the interest charged in the period and
amortisation of the right to use asset.
Impairment of investments in subsidiaries (Company only)
The Company has intercompany receivables of GBP13.38 million.
The management have reviewed these intercompany loans and have
concluded that, given the strong growth and future prospects of the
relevant subsidiaries, there is no impairment required.
-- Alternative accounting estimate that could have been applied
- impair the intercompany receivable
-- Effect of that alternative accounting estimate - at Group
level no impact, at Company level reduction of intercompany asset
and corresponding charge to the statement of comprehensive
income.
Share based payments
The fair value of share-based payments is calculated using the
methods detailed in note 19 and using certain assumptions. The key
assumptions around volatility, expected life and the risk free rate
of return are based on historic volatility over previous periods,
the management's judgement of the average expected period to
exercise, and the yield on the UK 5-year gilt at the date of
issuance.
-- Alternative accounting estimate that could have been applied
- change the expected time to maturity of the option
-- Effect of that alternative accounting judgement - the change
would result in a lower or higher option valuation, changing the
charge made in the Statement of Comprehensive Income and an equal
change to the share option reserve held in the Statement of
Financial Position.
s) Significant judgements
In the process of applying the Group's accounting policies, the
Directors makes various judgements that can significantly affect
the amounts recognised in the financial statements. The critical
judgements are considered to be the following:
Capitalised development expenditure
The Group exercises judgement concerning the future in assessing
the carrying amounts of capitalised development costs. To
substantiate the carrying amount the Directors have applied the
criteria of IAS 38 and considered the future economic benefit
likely as a result of the investment.
Careful judgement by the Directors is applied when deciding
whether the recognition requirements for development costs have
been met. Judgement factors include: the current sales of the AWS
platform; future demand; type of additional features being added;
and the resource necessary to finalise the development road-map
over the next few years. This is necessary as the economic success
of any product development is uncertain and may be subject to
future technical problems at the time of recognition. Judgements
are based on the information available at each balance sheet date.
In addition, all internal activities related to the research and
development of new software products are continuously monitored by
the Directors.
Contract revenue and direct costs
The Group has adopted IFRS 15. A key related judgement is
whether the contract and direct costs has to be deferred and held
in the Statement of Financial Position and recognised over the
estimated economic period of the contract or alternatively released
straight to the Statement of Comprehensive Income over the
estimated term of the contract.
Valuation of separately identifiable intangible assets
Separately identifiable intangible assets are identified and
amortised over a defined period. The Directors use certain
judgements and assumptions to ascertain the appropriate value of
the intangible asset and the period of amortisation to be used for
the asset.
5. LOSS BEFORE TAXATION
The loss on ordinary activities is stated after:
2021 2020
GBP000s GBP000s
Disclosure of the audit and non-audit fees
Fees payable to the Group's auditors for:
The audit of Company's accounts 22 27
The audit of the Company's subsidiaries pursuant
to legislation 26 15
Fees payable to the Group's auditors for other
services
Audit related assurance services - -
Tax - compliance services - 6
Tax - advisory services - 9
Depreciation and amortisation - charged in administrative
expenses
Right of use assets, equipment and fixtures 69 82
Intangible assets 76 29
Capitalised development 595 433
--------------- ------------
740 544
Rents payable on flexible office space 44 64
Amortisation of share-based payments 115 108
Foreign exchange loss/(gain) in period 550 (15)
6. FINANCE INCOME
2021 2020
GBP000s GBP000s
Unwind of loan note receivable discount - -
Bank interest receivable - 1
--------------- ------------
- 1
7. FINANCE EXPITURE
2021 2020
GBP000s GBP000s
Interest on bank borrowings 194 126
Other 36 14
--------------- ------------
230 140
8. DIRECTORS AND EMPLOYEES
Staff costs of the Group, including the directors who are
considered to be part of the key management personnel, paid during
the year were as follows.
2021 2020
GBP000s GBP000s
Wages and salaries 5,205 4,712
Social security costs 532 474
Other pension costs 75 82
5,812 5,268
2021 2020
Heads Heads
Average number of employees during the year 68 54
Remuneration in respect of directors was as follows:
2021 2020
GBP000s GBP000s
Emoluments 627 523
Bonus 192 103
Pension contributions to money purchase pension
schemes 35 27
Employer's National insurance and US Federal Taxes 98 84
---------- --------------
952 737
During the year 4 (2020: 4) directors participated in money
purchase pension schemes.
The Board consider the board of directors to be the key
management for the Group. The amounts set out above include
remuneration in respect of the highest paid director as
follows:
2021 2020
GBP000s GBP000s
Emoluments 187 140
Bonus 108 49
Pension contributions to money purchase pension
schemes 20 13
======= =======
A detailed breakdown of the Directors' Emoluments, in line with
the AIM rules, appears in the Directors' Report.
9. SEGMENTAL INFORMATION
PCI-PAL PLC operates one business sector: the service of
providing data secure payment card authorisations for call centre
operations and this is delivered on a regional basis. The Group
manages its operations by reference to geographic segments, which
are reported on below:
Segment results, assets and liabilities include items directly
attributable to a segment as well as those that can be allocated on
a reasonable basis. Unallocated assets comprise items such as cash
and cash equivalents, taxation and borrowings. All liabilities,
other than the bank loan, are unallocated. Segment capital
expenditure is the total cost incurred during the year to acquire
segment assets that are expected to be used for more than one
period.
2021
PCI Pal PCI Pal Central Total
EMEA North America GBP000s GBP000s
GBP000s GBP000s
Revenue 5,457 1,905 - 7,362
Cost of Sales (1,646) (159) - (1,805)
------------- ------------------- -------------- -------------
Gross Profit 3,811 1,746 - 5,557
70% 92% 75%
Administration Expenses (4,677) (3,723) (1,118) (9,518)
------------- ------------------- -------------- -------------
Loss from Operating Activities (866) (1,977) (1,118) (3,961)
Finance income - - - 0
Finance costs (30) (6) (194) (230)
------------- ------------------- -------------- -------------
Loss before tax (896) (1,983) (1,312) (4,191)
------------- ------------------- -------------- -------------
Segment assets 5,357 3,994 4,336 13,687
Segment liabilities (5,847) (3,656) (255) (9,758)
Other segment items:
Capital Expenditure
* Equipment, Fixtures & Licences 40 - - 40
Capital Expenditure
* Capitalised Development 761 159 - 920
Depreciation
* Equipment, Fixtures & Licences 145 - - 145
Depreciation
* Capitalised Development 547 48 - 595
2020
PCI Pal PCI Pal Central Total
EMEA North America GBP000s GBP000s
GBP000s GBP000s
Revenue 3,894 502 - 4,396
Cost of Sales (1,303) (50) - (1,353)
------------- ------------------- -------------- -------------
Gross Profit 2,591 452 - 3,043
67% 90% 69%
Administration Expenses (3,921) (2,533) (800) (7,254)
------------- ------------------- -------------- -------------
Loss from Operating Activities (1,330) (2,081) (800) (4,211)
Finance income - - 1 1
Finance costs (16) (8) (116) (140)
------------- ------------------- -------------- -------------
Loss before tax (1,346) (2,089) (915) (4,350)
------------- ------------------- -------------- -------------
Segment assets 3,860 4,313 1,081 9,254
Segment liabilities (3,848) (2,127) (1,367) (7,342)
Other segment items:
Capital Expenditure
* Equipment, Fixtures & Licences 329 - - 329
Capital Expenditure
* Capitalised Development 826 178 - 1,004
Depreciation
* Equipment, Fixtures & Licences 111 - - 111
Depreciation
* Capitalised Development 417 16 - 433
Revenue can be split by location of customers as follows:
2021 2020
GBP000s GBP000s
PCI - PAL division
United Kingdom 5,298 3,638
United States 1,440 330
Canada 329 103
European Union 195 126
Asia Pacific 93 69
Middle East 7 130
---------- ----------
Total 7,362 4,396
All non-current assets are located in the United Kingdom and the
largest customer accounted for 10% (2020: 18%) of the revenue of
the Group.
10. EARNINGS PER SHARE
The calculation of the earnings per share is based on the loss
after taxation added to reserves divided by the weighted average
number of ordinary shares in issue during the relevant period as
adjusted for treasury shares. Details of potential share options
are disclosed in note 19.
12 12
months months
ended ended
30 30
June June
2021 2020
Loss after taxation added to reserves (GBP4,038,000) (GBP4,129,000)
Basic weighted average number of ordinary
shares in issue during the period 60,829,234 46,720,616
Diluted weighted average number of ordinary
shares in issue during the period 66,418,818 51,687,283
Basic and diluted earnings per share (6.64) p (8.84) p
There are no separate diluted earnings per share calculations
shown as it is considered to be anti-dilutive.
11. TAXATION
2021 2020
GBP000s GBP000s
Analysis of charge in the year
Current tax:
In respect of the year:
Corporation tax based on the results for - -
the year
Adjustment in respect for prior periods
(R & D Tax credit received) 154 220
---------------------- ---------------
Total current tax credited 154 220
---------------------- ---------------
Deferred tax:
Origination and reversal of timing differences - -
---------------------- ---------------
Total deferred tax charged - -
---------------------- ---------------
Tax on profit on ordinary activities credited 154 220
---------------------- ---------------
Factors affecting current tax charge
The tax assessed on the loss on ordinary activities for the year
was lower than the standard rate of corporation tax in the UK of
19% (2020: 19%)
2021 2020
GBP000s GBP000s
Loss on ordinary activities before tax (4,191) (4,350)
Tax on loss on ordinary activities at standard
UK rate of taxation (796) (868)
Effects of:
Overseas tax rates (77) -
Expenses not deductible for tax purposes 26 1
Adjustments in respect of prior periods
R & D tax credit received 154 221
Depreciation (less than)/in excess of capital
allowances for the year - 60
Other - -
Movement on unrecognised deferred tax losses 1,419 807
Effect of change in tax rate (572) -
Total tax credited for the year 154 221
---------------------- ---------------
The Group has unrecognised tax losses carried forward of GBP18.1
million (2020: GBP13.7 million).
The R&D tax credit received in FY 2021 is in respect to the
trading in FY 2019. No credit has been recognised in relation to
the financial years 2020 or 2021 which are pending submission to
HMRC.
12. INTANGIBLE ASSETS
SIP, RTP
and SBC licences
2021 GBP000s Capitalised
Development Total
GBP000s GBP000s
Cost:
At 1 July 2020 379 2,519 2,898
Additions - 920 920
Foreign exchange movement - (24) (24)
Disposals - - -
At 30 June 2021 379 3,415 3,794
--------- ------------- -------
Depreciation (included
within administrative
expenses):
At 1 July 2020 37 723 760
Charge for the year 76 595 671
Foreign exchange movement - (3) (3)
Disposals - - -
At 30 June 2021 113 1,315 1,428
--------- ------------- -------
Net book amount at 30
June 2021 266 2,100 2,366
SIP, RTP
2020 and SBC Capitalised
Licences Development Total
GBP000s GBP000s GBP000s
At 1 July 2019 83 1,515 1,598
Additions 297 1,004 1,301
Foreign exchange movement - - -
Disposals - - -
--------- ------------- -------
At 30 June 2020 380 2,519 2,899
--------- ------------- -------
Depreciation (included
within administrative
expenses):
At 1 July 2019 8 290 298
Charge for the year 29 433 462
Foreign exchange movement - - -
Disposals - - -
--------- ------------- -------
At 30 June 2020 37 723 760
--------- ------------- -------
Net book amount at 30
June 2020 343 1,796 2,139
13. PLANT AND EQUIPMENT Right of
use Asset
GBP000s Fixtures
2021 and Fittings Computer
GBP000s Equipment Total
GBP000s GBP000s
Cost:
At 1 July 2020 82 22 258 362
Additions - - 40 40
Disposals - - (1) (1)
-------
At 30 June 2021 82 22 297 401
------- --------- ----------- -------
Depreciation (included
within administrative
expenses):
At 1 July 2020 35 14 210 259
Charge for the year 33 4 32 69
Disposals - - (1) (1)
-------
At 30 June 2021 68 18 241 327
------- --------- ----------- -------
Net book amount at 30
June 2021 14 4 56 74
Right Fixtures
2020 of use and Computer
Asset Fittings Equipment Total
GBP000s GBP000s GBP000s GBP000s
At 1 July 2019 - 22 226 248
On adoption of IFRS 16 82 - - 82
Additions - - 32 32
Disposals - - - -
------- --------- ----------- -------
At 30 June 2020 82 22 258 362
------- --------- ----------- -------
Depreciation (included
within administrative
expenses):
At 1 July 2019 - 10 167 177
Charge for the year 35 4 43 82
Disposals - - - -
------- --------- ----------- -------
At 30 June 2020 35 14 210 259
------- --------- ----------- -------
Net book amount at 30
June 2020 47 8 48 103
On the 1(st) July 2019 the Group adopted IFRS 16: Leases. At the
time of the adoption the Group only held one operating lease for
its office buildings in Ipswich.
Following the change in the accounting policy the following
items were created in the balance sheet.
- Right to use asset - increase by GBP82,000
- Lease liability - increase by GBP82,000
The net impact on retained earnings on 1 July 2019 was GBPnil,
and there were no other adjustments required on the balance
sheet.
The total cash outflow for leases in the year was GBP45,000
(2020: GBP45,000), made up of the principal lease payments of
GBP33,000 (2020: GBP35,000) and lease interest payments of
GBP12,000 (2020: GBP10,000).
There were no additions to right-of-use assets acquired in the
year.
14. TRADE AND OTHER RECEIVABLES
Due within one year 2021 2020
GBP000s GBP000s
Trade receivables 2,146 1,263
Accrued income 45 60
Deferred costs 333 468
Other Prepayments 404 552
-------------------- --------------
Trade and other receivables due within
one year 2,928 2,343
-------------------- --------------
Due after more than one year 2021 2020
GBP000s GBP000s
Deferred costs 801 368
-------------------- --------------
Trade and other receivables due after one
year 801 368
-------------------- --------------
All amounts are considered to be approximately equal to the
carrying value. The maximum exposure to credit risk at the
reporting date is the carrying value of each class of receivables
mentioned above.
Trade receivables are reviewed at inception under an expected
credit loss model, and then subsequently at each period end for
further indicators of impairment, and a provision has been recorded
as follows:
2021 2020
GBP000s GBP000s
Opening provision 1 8
Credited to income - (7)
------- -------
Closing provision at 30 June 1 1
------- -------
All of the impaired trade receivables are past due at the
reporting dates. In addition, some of the non-impaired trade
receivables are past due at the reporting date:
2021 2020
GBP000s GBP000s
0-30 days past due 177 103
30-60 days past due 16 4
Over 60 days past due - 36
------- -------
193 143
------- -------
The carrying value of trade receivables is considered a
reasonable approximation of fair value. All of the receivables have
been reviewed for indicators of impairment. The movement in the
expected credit losses (ECLs) provision is shown above. Trade
receivables are recorded and measured in accordance with note 4 (m)
above. The Group applies the IFRS 9 simplified approach to
measuring ECLs using a lifetime expected credit loss provision for
trade receivables. The expected loss rates are based on the Group's
historical credit losses experienced over the three-year period
prior to the period end, the future economic conditions of the
country relating to the overdue debtor and the contract position of
each overdue debtor.
15. CURRENT LIABILITIES
2021 2020
GBP000s GBP000s
Trade payables 557 675
Social security and other taxes 368 242
Deferred Income 6,153 3,674
Right of use lease liability 15 32
Accruals 724 571
---------------------- -------------
Trade and other payables 7,817 5,194
Bank Loan (note 16) - 545
---------------------- -------------
Total current liabilities due within one
year 7,817 5,739
---------------------- -------------
The deferred income figure above includes amounts relating to
contracts where the annual licence fee has been invoiced in advance
and deferred set-up and professional fees that have not reached a
stage where the revenue is being recognised and so is treated as
all due in less than one year for reporting purposes.
16. NON-CURRENT LIABILITIES
2021 2020
GBP000s GBP000s
Deferred Income 1,941 859
Right of use lease liability - 16
------- -------
Other payables 1,941 875
Bank loans - 728
------- -------
Total non-current liabilities due after
one year 1,941 1,603
------- -------
Borrowings
Bank loans are repayable as follows:
2021 2020
GBP000s GBP000s
Within one year - 545
After one year and within two years - 545
After two years and within five years - 183
Over five years - -
------- -------
- 1,273
------- -------
The deferred income figure above includes amounts relating to
contracts where the annual licence fee has been invoiced multi
years in advance, and deferred set up and professional services
fees that have not reached a stage where the revenue is being
recognised and so is treated as all due in less than one year for
reporting purposes.
17. DEFERRED TAXATION
Tax losses Total
GBP000s GBP000s
Opening balance at 1 July 2019 - -
(Charged)/credited through the statement of
comprehensive income in the year - -
------------- -----------
At 30 June 2020 - -
Charged through the statement of comprehensive
income in the year - -
------------- -----------
At 30 June 2021 - -
2021 2020
GBP000s GBP000s
Unprovided deferred tax assets
Accelerated capital allowances - -
Trading losses 4,143 2,600
------------- -----------
4,143 2,600
------------- -----------
The unprovided deferred tax assets are calculated at an average
rate of 25% for the UK and 23% for USA (2020: 19.0% UK 21% US).
18. GROUP UNDERTAKINGS
At 30 June 2021, the Group included the following subsidiary
undertakings, which are included in the consolidated accounts:
Name Country of Class of share Proportion Nature of business
Incorporation capital held held
PCI-PAL (U.K.) England Ordinary 100% Payment Card Industry
Limited(1) software services
provider
---------------- ---------------- ------------ -----------------------
IP3 Telecom Limited(1) England Ordinary 100% Dormant
---------------- ---------------- ------------ -----------------------
The Number Experts England Ordinary 100% Dormant
Limited(1)
---------------- ---------------- ------------ -----------------------
PCI PAL (US) Inc(2) United States Ordinary 100% Payment Card Industry
of America software services
provider
---------------- ---------------- ------------ -----------------------
PCI PAL (AUS) Ordinary 100% Dormant
Pty Ltd(3) Australia
---------------- ---------------- ------------ -----------------------
(1) Registered at 7 Gamma Terrace, Ransomes Europark, Ipswich,
Suffolk IP3 9FF
(2) Registered at 2215B Renaissance Drive, Las Vegas, Nevada USA
89119
(3) Registered at 62 Burwood Road, Burwood, NSW 2134
Australia
19. SHARE CAPITAL
Group 2021 2021 2020 2020
Number GBP000s Number GBP000s
Authorised:
Ordinary shares of 1 pence
each 100,000,000 1,000 100,000,000 1,000
Allotted called up and fully
paid:
Ordinary shares of 1 pence
each 65,479,818 655 59,387,845 594
On 10 May 2021 the Company issued 75,000 ordinary shares of 1
pence in settlement of an exercise of options at 33 pence per
share.
On 30 April 2021 the Company placed 5,789,473 ordinary shares of
1 pence with various institutional investors, priced at 95 pence
per share. The placing raised a gross amount of GBP5.50 million
before expenses. The new shares represent approximately 9.7% of the
Company's issued ordinary share capital (excluding those held as
treasury shares) immediately following the placing.
On 1 April 2021 the Company issued 60,000 ordinary shares of 1
pence in settlement of an exercise of options at 33 pence per
share.
On 20 January 2021 the Company issued 67,500 ordinary shares of
1 pence in settlement of an exercise of options at 45.5 pence per
share.
On 23 July 2020 the Company issued 100,000 ordinary shares of 1
pence in settlement of an exercise of options at 33 pence per
share.
On 17 April 2020 the company placed 16,666,667 ordinary shares
of 1 pence with various institutional investors, priced at 30 pence
per share. The placing raised a gross amount of GBP5.00 million
before expenses. The new shares represent approximately 28.14% of
the Company's issued ordinary share capital (excluding those held
as treasury shares) immediately following the placing.
The Group owns 167,229 (2020: 167,229) shares and these are held
as Treasury Shares.
During the year, the share price fluctuated between 117.5 pence
and 36.5 pence and closed at 93.0 on 30 June 2021.
Share Option schemes
The Company operates an Employee Share Option Scheme. The share
options granted under the scheme are subject to performance
criteria and generally have a life of 10 years. The grant price is
normally taken with reference to the closing quotation price as
derived from the Daily Official List of the London Stock Exchange,
however, the Remuneration Committee will adjust the grant price if
it deems there are extraordinary circumstances to justify doing
so.
The performance criteria are set by the remuneration committee.
The grants are individually assessed with regard to the location of
the employee and generally have one of the following performance
criteria:
1: 50% of the options will vest if the share price of the
Company as measured on the London Stock Exchange trades above the
share price at the date of grant, for a continuous 30 day period;
25% or the options will vest if the share price of the Company
trade 50% above the share price of the Company at the date of Grant
for a continuous 30 day period; and the remaining 25% will vest if
the share price of the Company trades 100% above the share price of
the Company at the date of Grant for a continuous 30 day period.
The options cannot be exercised for a three year period from the
date of Grant, or;
2: The number of options granted will vest equally over a four
year period in monthly tranches with the earliest exercise date
being 12 months from the date of issue of the option
All options will lapse after a maximum ten-year period if they
have not been exercised.
The following options grants have been made and are valued using
the Monte Carlo Pricing model with the following assumptions:
Date of 25-May-17 12-Nov-18 10-May-19 13-Jun-19 08-Jul-19 08-Jul-19 08-Jul-19 08-Jul-19 25-Jul-19
Grant
Exercise 33.0 26.5 22.0 28.5 28.5 26.5 19.0 23.0 19.0
Price pence pence pence pence pence pence pence pence pence
Price at 44.0 26.5 22.0 28.5 28.5 26.5 19.0 23.0 33.0
date of pence pence pence pence pence pence pence pence pence
grant
Estimated 5 years 5 years 5 years 5 years 5 years 5 years 5 years 5 years 5 years
time to
Maturity
Expected
Dividend
yield 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Volatility 20.00% 20.00% 20.00% 20.00% 69.00% 69.00% 69.00% 69.00% 69.00%
Risk Free
Rate 0.57% 1.00% 0.87% 0.62% 0.59% 0.59% 0.59% 0.59% 0.59%
No Steps
used in
calculation 10 10 10 10 10 10 10 10 10
No of
simulations
used in
calculation 100,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000 10,000
Fair value 14.11 14.23 14.23 14.30 15.42 13.15 11.29 13.38 14.25
of Option pence pence pence pence pence pence pence pence pence
Weighted 0.90 0 years 2.85 2.95 3.02 3.02 3.02 3.02 0 years
average years years years years years years years
life in
years
# option
shares
issued
at grant 3065000 225000 145000 525000 215000 115000 20000 105000 300000
# option
shares
forfeited 1080000 225000 25000 0 25000 0 0 0 300000
# option
shares
exercised 235000 0 0 0 0 0 0 0 0
# option
shares
outstanding
as at 30
June 2021 1750000 0 120000 525000 190000 115000 20000 105000 0
# option
shares
exercisable
as at 30
June 2021 1750000 0 0 0 0 0 0 0 0
Charge GBP35,801 -GBP4,658 GBP2,592 GBP14,982 -GBP282 GBP711 GBP55 GBP1,628 -GBP12,211
for year
Total GBP235,623 GBP0 GBP7,321 GBP30,787 GBP11,614 GBP5,995 GBP895 GBP5,570 GBP0
cumulative
charge
as at 30
June 2021
Date of 08-Jul-20 01-Dec-20 28-Jan-21 23-Mar-21 23-Mar-21 12-Apr-21 12-Apr-21 28-Jan-21 Total
Grant
Exercise 40.0 44.0 60.0 65.0 65.0 113.5 113.5 93.0
Price pence pence pence pence pence pence pence pence
Price at 40.0 44.0 60.0 108.5 108.5 113.5 113.5 93.0
date of pence pence pence pence pence pence pence pence
grant
Estimated 5 years 5 years 5 years 5 years 5 years 5 years 5 years 5 years
time to
Maturity
Expected
Dividend
yield 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Volutility 45.89% 45.60% 45.88% 45.88% 45.88% 45.88% 45.88% 45.99%
Risk Free
Rate -0.04% 0.04% -0.03% 0.37% 0.37% 0.37% 0.37% 0.35%
No Steps
used in
calculation 225 225 250 250 250 250 250 250
No of
simulations
used in
calculation 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000
Fair value 15.63 17.24 24.91 61.63 61.63 42.40 42.40 37.06
of Option pence pence pence pence pence pence pence pence
Weighted 4.02 4.42 4.58 4.73 4.73 4.78 4.78 4.99
average years years years years years years years years
life in
years
# option
shares
issued
at grant 815000 140000 65000 315000 25000 220000 30000 25000 6,350,000
# option
shares
forfeited 0 0 0 0 0 0 0 0 1,655,000
# option
shares
exercised 0 0 0 0 0 0 0 0 235,000
# option
shares
outstanding
as at 30
June 2021 815000 140000 65000 315000 25000 220000 30000 25000 4,460,000
# option
shares
exercisable
as at 30
June 2021 0 0 0 0 0 0 0 0 1,750,000
Charge GBP24,932 GBP2,791 GBP1,358 GBP10,537 GBP836 GBP4,040 GBP551 GBP5 GBP83,668
for year
Total GBP24,932 GBP2,791 GBP1,358 GBP10,537 GBP836 GBP4,040 GBP551 GBP5 GBP342,857
cumulative
charge
as at 30
June 2021
The fair value of these options has been calculated on an issue
by issue basis and GBP83,668 (2020: GBP95,438) has been charged to
the statement of comprehensive income account for this financial
year.
The following options have been valued using a Black Scholes
Pricing model with the following assumptions:
Date of 28-Jun-17 04-Oct-17 12-Jul-18 12-Jul-18 12-Nov-18 12-Nov-18 07-Jan-19 27-Feb-19
Grant
Exercise 41.5 44.5 28.5 28.5 26.5 26.0 18.4 23.0
Price pence pence pence pence pence pence pence pence
Price at 41.5 44.5 28.5 28.5 26.5 26.0 18.4 23.0
date of pence pence pence pence pence pence pence pence
grant
Estimated 5 years 5 years 5 years 5 years 5 years 5 years 5 years 5 years
time to
Maturity
Expected
Dividend
yield 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Risk Free
Rate 0.57% 0.57% 1.00% 1.00% 1.03% 1.03% 0.89% 0.96%
Volatility 20.00% 20.00% 20.00% 20.00% 20.00% 20.00% 20.00% 20.00%
Fair value 7.8 8.4 5.6 5.6 5.0 5.2 3.6 4.5
of Option pence pence pence pence pence pence pence pence
Weighted fully 0.26 1.03 2.03 1.36 1.36 1.52 1.66
average vested years years years years years years years
life in
years
# option
shares
issued
at grant 150,000 150,000 415,000 641,667 150,000 60,000 15,000 100,000
# option
shares
forfeited 0 22,500 25,000 550,000 0 0 0 0
# option
shares
exercised 0 67,500 0 0 0 0 0 0
# option
shares
outstanding
at 30 June
2021 150,000 60,000 390,000 91,667 150,000 60,000 15,000 100,000
# option
shares
exercisable
as at 30
June 2021 150,000 56,100 289,575 91,667 99,000 39,600 9,300 58,500
Total charge GBP4,705 GBP3,485 GBP7,663 GBP1,032 GBP2,462 GBP1,027 GBP107 GBP1,437
for year
Total GBP11,756 GBP10,386 GBP16,350 GBP3,074 GBP4,894 GBP2,042 GBP268 GBP2,655
cumulative
charge
as at 30
June 2021
Date of 08-Jul-20 23-Apr-19 01-Dec-20 28-Jan-21 23-Mar-21 Total
Grant
Exercise 40.0 44.0 44.0 60.0 108.5
Price pence pence pence pence pence
Price at 40.0 44.0 44.0 60.0 108.5
date of pence pence pence pence pence
grant
Estimated 4 years 4 years 4 years 4 years 4 years
time to
Maturity
Expected
Dividend
yield 0.00% 0.00% 0.00% 0.00% 0.00%
Risk Free
Rate -0.04% 0.82% 0.04% -0.03% 0.37%
Volatility 59.00% 34.00% 64.00% 54.00% 52.00%
Fair value 17.8 1.3 21.0 24.6 43.6
of Option pence pence pence pence pence
Weighted 3.02 1.81 3.42 3.58 3.72
average years years years years years
life in
years
# option
shares
issued
at grant 80,000 200,000 85,000 55,000 35,000 2,136,667
# option
shares
forfeited 20000 0 0 0 0 617,500
# option
shares
exercised 0 0 0 0 0 67,500
# option
shares
outstanding
at 30 June
2021 60,000 200,000 85,000 55,000 35,000 1,451,667
# option
shares
exercisable
as at 30
June 2021 - 109,500 - - - 903,242
Total charge GBP2,617 GBP1,404 GBP2,599 GBP1,430 GBP1,045 GBP31,013
for year
Total GBP2,617 GBP1,404 GBP2,599 GBP1,430 GBP1,045 GBP60,518
cumulative
charge
as at 30
June 2021
The fair value of these options has been calculated on an issue
by issue basis and GBP31,013 (2020: GBP13,215) has been charged to
the statement of comprehensive income account for this financial
year.
The analysis of the Company's option activity for the financial
year is as follows:
2021 2020
Weighted Number of Weighted Number of
Average exercise Options Average Options
Price exercise
price
GBP GBP
Options outstanding at
start
of year 0.302 4,916,667 0.303 5,116,667
Options granted during the
year 0.566 2,090,000 0.234 755,000
Options exercised during
the
year 0.356 (302,500) -
Options lapsed during the
year 0.269 (792,500) 0.254 (955,000)
Options outstanding at end
of year 0.397 5,911,667 0.302 4,916,667
Options exercisable at the
end of year 2,653,242 1,707,570
20. FINANCIAL RISK MANAGEMENT AND FINANCIAL INSTRUMENTS
The Group uses various financial instruments including cash,
trade receivables, trade payables, other payables, loans and
leasing that arise directly from its operations. The main purpose
of these financial instruments is to maintain adequate finance for
the Group's operations. The existence of these financial
instruments exposes the Group to a number of financial risks, which
are described in detail below. The Directors do not consider price
risk to be a significant risk. The Directors review and agree
policies for managing each of these risks, as summarised below, and
these remain unchanged from previous years.
Capital Management
The capital structure of the Group consists of debt, cash, loans
and equity. The Group's objective when managing capital is to
maintain the cash position to protect the future on-going
profitable growth which will reflect in shareholder value.
At 30 June 2021, the Group had a closing cash balance of
GBP7,518,000 (2020: GBP4,301,000) and borrowings of GBPnil (2020:
GBP1,273,000).
The Company does not have any debt facilities available.
Financial risk management and objectives
The Group seeks to manage financial risk to ensure sufficient
liquidity is available to meet foreseeable needs and to invest cash
assets safely and profitably. The Directors achieve this by
regularly preparing and reviewing forecasts based on the trends
shown in the monthly management accounts.
On 30 April 2021 the Company placed 5,864,473 ordinary shares of
1 pence with various institutional investors, priced at 95 pence
per share. The placing raised a gross amount of GBP5.50 million
before expenses.
Interest rate risk
In June 2021 the Company repaid its outstanding debt facility
with Shawbrook Bank and so does not have any interest rate
risk.
Credit risk
The Group's principal financial assets are cash and trade
receivables, with the principal credit risk arising from trade
receivables. In order to manage credit risks the Group conducts
third party credit reviews on new clients and takes deposits or
advanced payments where this is deemed necessary. Where possible
the Group collects payment by direct debit, limiting the exposure
to a build-up of a large outstanding debt. Concentration of credit
risk with respect to trade receivables are limited due to the wide
nature of the Group's customer base: The largest customer accounted
for 10% of revenues in the financial year, but this is expected to
continue to drop in the next financial year as we add more and more
customers. Historically, bad debts within the Group are minimal due
to the importance of our service to the customer as well as the
level of payments in
advance we receive. This situation is not expected to change in the future.
Liquidity risk
The Group aims to mitigate liquidity risk by closely monitoring
cash generation and expenditure. Cash is monitored weekly and
forecasts are prepared monthly to ensure that the movements are in
line with the Directors' strategy.
Foreign currencies and foreign currency risk
During the year exchange losses of GBP550,000 (2020: Gain of
GBP15,100) have arisen and as at the 30 June 2021 the Group held
the following foreign currency cash balances:
US Dollar: $1,053,588 Sterling equivalent: GBP 754,233 (2020:
GBP279,508)
Canadian Dollar: $ 266,342 Sterling equivalent: GBP 155,211 (2020: GBP14,575)
Australian Dollar: $ 195,517 Sterling equivalent: GBP 105,127
(2020: GBP17,608)
Euro EUR 147,627 Sterling equivalent: GBP 126,263 (2020:
GBPNil)
Total Sterling equivalent: GBP1,140,834 (2020: GBP311,691)
Transactions in foreign currencies are translated at the
exchange rate ruling at the date of the transaction and monetary
assets and liabilities in foreign currencies are translated at the
rates ruling at the year end. At present foreign exchange
translation is low and therefore hedging and risk management is not
deemed necessary as the company trades and spends in the various
currencies.
The Group's principal exposure to exchange rate fluctuations
arise on the translation of overseas net assets, profits and losses
into Sterling, for presentational purposes. The exchange rate
fluctuations are reported by taking the differences that arise on
the retranslation of the net overseas investments to the currency
reserve.
Foreign currency risk on cash balances is monitored through
regular forecasting and the Group tries to maintain a minimum level
of currency in the accounts so as to meet the short term working
capital requirements.
No sensitivity analysis is provided in respect of foreign
currency risks as the risk is considered to be moderate.
21. CAPITAL COMMITMENTS
The Group has no capital commitments at 30 June 2021 or 30 June
2020.
22. CONTINGENT ASSETS
The Group has no contingent assets at 30 June 2021 or 30 June
2020.
23. CONTINGENT LIABILITIES
In October 2019 the Group entered into a GBP2.75 million loan
facility with Shawbrook Bank. As part of the loan agreement
Shawbrook Bank will be entitled to receive a cash based payment
calculated on the value generated, over a 10 year period up to
October 2029, on the equivalent of GBP206,250 of phantom shares
(being 7.5% of the facility) if there is a takeover of the Group or
a debt refinancing of the Shawbrook debt.
The exit fee is a cash payment of a sum equal to P, where:
P = (A x B) - C
and where:
A = the Phantom Shares Number - the Phantom Shares Value divided
by the fair market value of one ordinary share, calculated using
the average of the closing share price in the previous five days
immediately prior to the date of the facility letter;
B = the fair market value of one ordinary share at the time of
the exit fee event; and
C = the Phantom Shares Value, which is GBP206,250.
An Exit Fee Event is where there is:
(a) a sale or other disposition of all or substantially all of
the assets in the Company in whatever form (whether in a single
transaction or multiple related transactions); or
(b) an acquisition of shares in the Company by a person (and any
persons acting in concert with that person) that results in that
person (together with any such persons acting in concert) acquiring
a controlling interest in the Company; or
(c) a reorganisation, consolidation or merger of the Company
(whether in a single transaction or multiple related transactions)
where shareholders before the transaction(s) directly or indirectly
beneficially own issued voting securities of the surviving entity
after the transaction(s) together carrying the right to cast 50% or
less of the votes capable of being cast at general meetings of the
surviving entity; or
(d) a distribution or other transfer of assets to the
shareholders of the Company in connection with the liquidation of
the Company; or
(e) a refinancing of the Facility with a bank or debt lender
(other than the Bank) within thirty six months of the date of the
Facility Agreement, provided that the outstanding balance of the
Facility prior to the date of such refinancing is equal to or
greater than GBP500,000
The debt facility was repaid from cashflow in June 2021 and so
no exit fee was triggered. However, there still remains a
contingent liability if the Company is taken over.
The Group has no other contingent liabilities.
24. CHANGES IN ACCOUNTING POLICY
There were no changes in accounting policies during the
financial year.
25. TRANSACTIONS WITH DIRECTORS
In the financial year to 30 June 2020, prior to becoming a
director, Simon Wilson was paid $83,333 (GBP65,975) in salary and
received $6,860 (GBP5,431) in benefits.
Apart from the director's standard remuneration there were no
other transactions with directors in the year to June 2021 or June
2020.
26. DIVIDENDS
The Directors are not proposing a dividend for the financial
year (2019: nil pence per share).
27. SUBSEQUENT EVENTS
There are no subsequent events to report.
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END
FR UPUACBUPGGUA
(END) Dow Jones Newswires
September 06, 2021 02:00 ET (06:00 GMT)
Pci-pal (LSE:PCIP)
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